- BoE upgrades growth forecast
- UK jobless claims fall more than expected
- German inflation unrevised
- Eurozone industrial production drops
FTSE 100: 0.43%
CAC 40: 0.75%
FTSE MIB: 0.77%
IBEX 35: 0.53%
Stoxx 600: 0.43%
European stocks jumped as the Bank of England (BoE) upgraded its economic growth forecast and reiterated that interest rate rises would be gradual.
In its Inflation Report the central bank forecast the UK economy will grow 3.5% this year, compared to an earlier estimate of 3.4%. In 2015 the Bank expects growth of 3%, up from the previous 2.9% projection.
As expected, the report provided no specific guidance on an interest rate hike but Governor Mark Carney said when they did increase it would be gradual.
Chris Williamson from Markit said weak pay growth "adds to the sense that any first rate rise will be delayed until early next year".
The Bank's forecasts assume that interest rates will rise from the record low of 0.5% by 25 basis points in the first quarter of next year and reach 2% by the end of 2016, he said.
"While it seems likely that calls to raise interest rates will start to gather strength in coming months, a majority vote for a rate rise still looks some way off.
"February therefore still looks the most likely month for the Bank to dip its toe into the water as far as tightening policy towards more normal levels is concerned, though November remains a possibility if the wages data pick up in coming months (please also see comments from prior email highlighted below into uncertainty about policy decision)."
The BoE also halved its forecast for average wage growth, saying it expects average salaries to rise by 1.25% this year.
The forecast came as official government data showed average weekly earnings fell 0.2% in the three months June, compared to a 0.4% rise the previous quarter. Analysts had predicted a 0.1% fall.
Jobless claims fell 33,600 in July, beating estimates for a 30,000 drop, after a 39,500 decrease in June. UK employers added 167,000 jobs in the three months to June, compared to 254,000 previously and the forecast for 270,000.
German consumer prices rose 0.8% year-on-year in July after a 1% increase in June, Germany's statistics confirmed on Wednesday.
Alpari UK analyst James Hughes said the German economy has been "struggling on all fronts" with weak figures on gross domestic product, inflation, trade and industrial production.
"This of course could pose a huge threat to the Eurozone and gives the European Central Bank huge problems," he said.
"The overall problem for the Mario Draghi is without a strong Germany, we do not have a strong Eurozone, and the fear is that all the measures thrown at dragging the economy out of the mire could well be about to fail due to the failing of the single currency's largest economy."
Eurozone industrial production fell 0.3% in June on the month, following a 1.1% decline. Economists had pencilled in a 0.4% rise.
In China, weaker-than-forecast reports supported arguments for loose policy.
Retail sales gained 12.2% in July after rising 12.4% a month earlier, falling short of analysts' estimates for a 12.5% increase. A separate report showed industrial production climbed 9% in July after a 9.2% lift in June. Analysts had expected it to rise at the same rate as June.
Later in Wednesday's session will see the release of the widely watched US retail sales figures for July.
Swiss Life, G4S
Swiss Life Holding gained after Switzerland's biggest life insurer said it will buy German real estate asset manager Corpus Sireo and reported an increase in first-half earnings.
G4S was higher after winning £1.2bn of contracts in the first half and increasing profits. G4S, which faced strong criticism for failing to provide enough security guards at the 2012 Olympics and allegations of overcharging on a UK government prisoner tagging contract, said new contract wins had risen 26%.
Meda AB declined after the Swedish drugmaker posted second-quarter earnings that fell short of analysts' projections.
Glencore edged lower after the mining company said zinc and lead output fell.
The euro fell 0.13% to $1.3352.
Brent crude futures dropped 0.05% to $102.96 per barrel, according to the ICE.