By Muvija M and Yadarisa Shabong
(Reuters) - London's FTSE 100 rebounded on growing hopes of more central bank stimulus after the Bank of England cut its growth forecast and the U.S. Federal Reserve flagged interest rate cuts, though cruise operator Carnival (NYSE:CCL) slid after lowering its profit target.
The FTSE 100 index rose 0.3% with BP (LON:BP) and Shell (LON:RDSa) both up more than 1% as Middle East tensions drove oil prices higher.
The more domestically focused midcap index outperformed, rising 0.7% to its highest in nearly a month. It was led higher by a 22% surge in car auction firm BCA Marketplace after it received a nearly 2 billion pound takeover bid from private equity firm TDR Capital.
The pound trimmed gains after the BoE cut its second-quarter growth forecast to zero and highlighted risks from global trade tensions and growing fears of a no-deal Brexit.
But exporter stocks still took a hit as sterling held on to some earlier gains. Reckitt Benckiser, HSBC and AstraZeneca all edged lower.
The BoE statement lifted hopes of more stimulus, after the Fed's statement late on Wednesday raised expectations that a decade-long global rally in stock markets may not quite have run out of steam.
"With the U.S. Federal Reserve now striking a more dovish pose as it also sees rising downside risks in the global economy, we shouldn't entirely rule out the possibility the next interest rate move may be downwards," Hargreaves Lansdown (LON:HRGV) analyst Laith Khalaf said.
Precious metals miner Fresnillo (LON:FRES) led gains with a 5.5% rise, having earlier jumped as much as 7%, as gold prices hit their highest in more than five years after the statement.
British Airways owner IAG (LON:ICAG) and easyJet (LON:EZJ) were up nearly 3%, recovering from steep falls in the last session when HSBC cut its rating on the stocks.
But London-listed shares in Carnival slumped 12% on their worst day in roughly 7-1/2-years as the cruise operator cut its profit forecast due to the Trump administration's sudden ban on cruises to Cuba.
Domino's Pizza Group Plc jumped 11% after a media report that the company is expected to appoint internal candidate Andrew Rennie as its new CEO.
Dixons Carphone (LON:DC) recouped some losses to be down 5.1% after earlier touching a decade-low, as it reported a slump in full-year profit and pointed to worse to come as it struggles in a fierce mobile phone retail market.
In contrast, homewares retailer Dunelm jumped 8.5% to a three-year high after it raised its earnings forecast for the second time in just over two months, while clothing retailer N Brown Group advanced 3% on results.