Europe close: Stocks notch solid gains as ECB cuts rates

The Stoxx 600 finished the session up 0.8% at 512.08 with all major indices across the continent putting in solid gains. Two standouts were the Ibex 35 in Madrid and Dax in Frankfurt which both jumped more than 1%.

Just after lunchtime, the European Central Bank cut interest rates by 25 basis points to 3.5%, as widely expected. This followed a reduction in June for the first time in five years, from 4.0% to 3.75%. The Bank said in a statement that it was "now appropriate to take another step in moderating the degree of monetary policy restriction" given the path of underlying inflation.

"Markets like it when expectation meets reality and the ECB’s latest rate cut not only followed their anticipated playbook perfectly but also set up the stick or twist narrative both the Bank of England and the US Fed seem likely to follow," said Danni Hewson, head of financial analysis at AJ Bell.

“Central bankers have been unquestionably cautious when it comes to this unwinding cycle, wary of the insidious stickiness of inflation, which caused such pain on both sides of the Atlantic."

Over on Wall Street, US equity indices got off to a mixed start as investors digested the latest producer price index, which showed that wholesale prices rose slightly more than expected over the month of August.

Market movers

Finnish telecoms giant Nokia finished higher, albeit trimming earlier gains, on market chatter that it had approached potential replacements for chief executive Pekka Lundmark. However, the company quashed the rumours.

Switzerland's Roche was under the cosh after disappointing results from an early-stage trial of a weight-loss drug.

Upgrades from Bank of America Securities were giving London-listed drinks giant Diageo and French car parts group Valeo a boost, as ratings on both stocks were raised to 'buy'.

Trainline surged as it lifted its full-year profit outlook following a strong first half, which was ahead of its expectations.