British stocks rise after BoE rate cut, softer US inflation data

By Tharuniyaa .

Dec 18 (Reuters) - London stocks rose on Thursday, lifted by the Bank of England's widely-anticipated interest rate cut and a lower-than-expected reading of U.S. inflation that bolstered the chances of further easing from the Federal Reserve.

The UK's blue-chip FTSE 100 .FTSE closed up 0.65% at its highest in over a month. The domestically focussed midcap FTSE 250 .FTMC index rose 0.76%.

With a broad-based rally underway, the pan-European benchmark index .STOXX added 0.9%.

The European Central Bank held rates and revised upward some of its growth and inflation forecasts, while the BoE cut its rate by 25 basis points to 3.75% with Governor Andrew Bailey saying that further reductions would be "a closer call".

Sterling firmed against the dollar, while gilt yields rose after the decision, reflecting markets' mixed view on how quickly borrowing costs will fall.

"One more cut could be on the cards, but given the tight vote, unless inflation keeps falling early next year, we might not see it. The BoE is clearly cautious," said Axel Rudolph, senior technical analyst at IG Group.

Aerospace and defence stocks .FTNMX502010 led the way higher with a 1.8% gain, rallying alongside shares of their European peers. Rolls-Royce RR.L jumped 3.8%, while Melrose Industries MRON.L and Babcock International Group BAB.L rose 2.6% and 1.4% respectively.

Precious metals and mining stocks .FTNMX551030 added 2.8%. Retailers .FTNMX404010 advanced 1.4%, powered by 7.5% jump in Currys CURY.L after the British electricals retailer reported that its first-half profit more than doubled.

The FTSE 100 is on track for its best year since 2009 with a 20% year-to-date climb, defying concerns about a sluggish domestic economy and fragile government finances.

Wall Street's benchmark S&P 500 index .SPX has risen 16% so far.

Among individual stocks, Premier Inn owner Whitbread WTB.L rose 6.3% - the top individual performer on the blue chip index - after Corvex disclosed a stake and urged a strategic review.