European markets rally as investors digest ECB and BOE decisions; Stoxx 600 up 1.3%

LONDON — European stocks jumped on Thursday as investors in the region digested key monetary policy decisions from the U.S. Federal Reserve, the Bank of England and the European Central Bank.

The pan-European Stoxx 600 climbed 1.3% by mid-afternoon, with tech stocks jumping 2.6% to lead gains as almost all sectors and major bourses traded in positive territory. Utilities slipped 0.4% lower, the only sector in the red.

The Bank of England on Thursday hiked interest rates for the first time since the onset of the pandemic, despite concerns over the rapid spread of the omicron variant in the U.K.

The Bank increased its main interest rate to 0.25% from its historic low of 0.1% as inflation pressures mount, arguing that the economic data satisfied policymakers' criteria for a hike, while the impact of the variant remains uncertain.

The European Central Bank further cut its bond purchases on Thursday but vowed to continue its unprecedented monetary policy support for the euro zone economy into 2022.

The ECB left its benchmark refinancing rate unchanged at 0%, while the rate on its marginal lending facility remained at 0.25% and the rate on its deposit facility was kept at -0.5%, in line with expectations.

IHS Markit Flash Composite Purchasing Managers' Index (PMI) readings on Thursday showed economic activity in the euro zone and the U.K. slowing sharply in December as the spread of the variant and renewed restrictions begin to bite businesses.

Global investors began the day digesting the U.S. central bank's signal on Wednesday that it would be aggressive on tapering bond purchases and sees several rate hikes in 2022.

The Fed will begin reducing the pace of its asset purchases in January and buy just $60 billion of bonds each month going forward, compared to $90 billion in the month of December.

Projections released overnight indicate that Fed officials see as many as three rate hikes coming in 2022, with two in the following year and another two in 2024.

The decision to aggressively ease bond purchases follows recent inflation data showing a 6.8% surge in November, which was higher than expected and the fastest rate since 1982.

In terms of individual share price movement, British online retail group THG gained more than 9% to lead the Stoxx 600 while at the bottom of the index, EDF shares plunged 12.9% after faults were found at one of its French nuclear power stations, leading the utility giant to cut its core profit goal for the year.

Asia-Pacific markets were mixed Thursday as investors also assessed the Fed news.

Meanwhile, U.S. stock futures were higher in early premarket trade on Thursday. More U.S. economic data is due out later in the day, including housing starts and jobless claims at 8:30 a.m. EST.

— CNBC's Tanaya Macheel and Saheli Roy Choudhury contributed to this report.