Europe close: Stocks end up as investors mull BoE, Fed announcements

(Sharecast News) - European stocks rose on Thursday as oil prices eased back, and after the Bank of England left rates unchanged as expected.

The benchmark Stoxx 600 closed up 0.9%, while France's CAC 40 rose 0.6% and Germany's DAX ticked up 0.7%. At the same time, Brent crude was down 2% at $103.71 a barrel and West Texas Intermediate was 1.2% lower at $101.21.

The Bank of England held interest rates at 3.75% for the sixth meeting in a row. The Monetary Policy Committee voted by a majority of 6-3 to keep rates on hold, with the three dissenters - Megan Greene, Catherine Mann and Huw Pill - favouring a 25 basis points hike.

The Bank said the six members who voted to keep rates unchanged were concerned about recent developments in a range of energy prices and their impact on holding CPI inflation above target for longer than had been previously expected.

"Domestic activity and tight financial conditions were restraining inflationary pressures, but the risk of second-round effects was growing in the absence of a lasting resolution of the conflict," it said. "Two members in this group (Swati Dhingra and Alan Taylor) acknowledged these risks, but placed particular weight on the role of slack in moderating inflation, evidence of restrained pass-through of costs to prices, and the restrictive level of Bank Rate, all of which would allow more time to observe further evidence."

Meanwhile, the three hawks in favour of a hike noted that the escalation and duration of the Middle East conflict continued to raise energy and food prices.

"Global factors such as AI supply constraints and El Niño would provide inflationary pressure as well. A projected surge in inflation would peak in early 2027, just as wage settlements were agreed," the BoE said. "A mitigating factor for second-round effects, slack in the labour market and economy, appeared to have peaked already given stronger GDP growth and indications of an expansion in employment. This increased the likelihood of meaningful second-round effects emerging. For these members, risk management was appropriate."

The BoE said the trio believed that a proactive increase in Bank Rate would help anchor inflation expectations.

The Bank also confirmed that it will pause government bond sales for the next six months and halt sales of long-dated gilts entirely.

Sarah Coles, head of personal finance at AJ Bell, said: "Don't get comfortable. The Bank of England has held rates for the sixth consecutive time, but the markets are increasingly convinced that several rate rises could be in the pipeline. The MPC may have pressed pause on rates, but it's expected to fast forward from here.

"Higher oil prices have inflicted an awful lot of damage, trading well over $100 a barrel again, and raising concerns that these higher prices will eventually feed into the cost of everything else. Inflation in August may have come in around expectations at 3.1%, but the rise was driven by petrol prices, and we know this is just the first spending category to react when oil prices are higher. Over time, price rises are likely to get more painful and widespread.

"The Bank has chosen not to move today, partly because wage rises are still relatively modest. Workers are less likely to demand big pay hikes while they're so nervous about the jobs market, so this won't necessarily get baked into the economy through higher wages over time. Given that growth is still sluggish, the MPC doesn't want to jump too soon and dampen potential growth prospects in the coming months, especially given how cautious consumers are and how reluctant businesses are to spend."

Investors were also digesting the Fed policy announcement overnight, which saw rates lifted by 25 basis points as expected to between 3.75% and 4.00%. This marked the first hike since 2023 and the decision was unanimously approved with a 12-0 vote.

In equity markets, French caterer Sodexo was boosted by an upgrade to 'overweight' from 'neutral' by JPMorgan, which said it sees "the set-up turning more constructive". The bank said Sodexo has started to price a turnaround and it sees scope for further upside as evidence of commercial momentum becomes more visible and delivery consistency improves.

"We see an approaching inflection, with FY 27 likely the first year to break the downtrend in new development, and the recent Meta award an important proof point, even if progress is unlikely to be linear," it said. At the same time, JPM said the stock still screens inexpensive on its numbers versus history and peers, leaving room for estimate upgrades and multiple re-rating.

On the downside, Germany's Bilfinger tumbled 21% as it cut its 2026 outlook again.