European stocks pared some losses to close higher on Thursday, after falling when the Bank of England surprised markets by holding rather than cutting interest rates.
BoE holds rates
The pan-European STOXX 600 index closed up around 0.9 percent. The U.K.'s benchmark FTSE 100 index pared some of the losses that followed the Bank of England's announcement, but still closed provisionally 0.1 percent lower. The more domestically focused FTSE 250 index of mid-cap stocks closed 0.1 percent higher.
European stocks got a leg up after Wall Street opened higher, with the Dow Jones industrial average setting a record high for the third-straight session.
The market had expected the Bank of England to cut interest rates by 25 basis points to 0.25 percent on Thursday in order to prevent the U.K economy from deteriorating in the aftermath of the Brexit vote. But the central bank held fire, maintaining its key interest rate at 0.5 percent.
It did hint at future easing measures, however.
"In the absence of a further worsening in the trade-off between supporting growth and returning inflation to target on a sustainable basis, most members of the committee expect monetary policy to be loosened in August," minutes from the bank's policy-setting meeting on Wednesday said.
In addition, the markets cheered a move towards political stability in Britain. Theresa May's appointment as the new prime minister came in the early evening on Wednesday, after David Cameron tendered his resignation to the Queen. May announced her cabinet, with a mixture of pro-European Union (EU) and Brexit campaigners appointed to the top jobs.
Italian banks rally
Italian banks were once again in focus for investors on Thursday. EU and European Central Bank policymakers said any potential assistance by the Italian government to the country's banks must follow all EU rules, including those that mean private investors suffer losses before public money is touched, Reuters reported.
Meanwhile the ECB's head of banking supervision, Deniele Bouy, said euro zone banks would be required to hold roughly the same amount in capital buffers this year as in 2015, which is viewed as positive for the bloc's lenders.
The news helped a number of Italian bank stocks rally. The country's lenders are plagued with a large portfolio of non-performing loans and there are fears a crash in Italy's banking sector could spread across the euro zone.
Unicredit shares leaped to close 6.6 percent higher after it said it might have to consider raising capital in order to strengthen its balance sheet.
Meanwhile, Anglo American closed 3.8 percent higher after JPMorgan Chase raised its price target for the stock.
Shares of Hays closed 5.5 percent up said the British recruitment firm reported full-year operating profit ahead of market expectations.