European stock markets rose on Thursday, rebounding for the third consecutive day as Bank of England Governor Mark Carney signaled policymakers will cut U.K. rates from historic lows to deal with Brexit-related fallout.

Carney said "some easing" will be necessary over the summer but also said monetary policy alone won't be able to offset the economic shock of Britain's planned retreat from the European Union.

Meanwhile political chaos continued in the U.K. with Boris Johnson, the former mayor of London and bookmakers' favorite to succeed David Cameron as prime minister announcing he wouldn't be running for leader. Fellow "leave" campaigner, Michael Gove, broke away from Johnson to announce he would be standing instead.

The FTSE 100 closed up 2.27% at 6,504.33 . In Frankfurt the Dax gained 0.71% to 9,680.09 and in Paris the Cac 40 closed 1.0% at 4,237.48. Earlier European Union figures showed inflation had returned to the eurozone in June, with prices up 0.1% on the year, compared with stagnation in May.

The pound was recently down 1.38% against the dollar at $1.3244 and 10-year U.K. government bond yields tumbled 8 basis points to 0.86%.

Brent oil was recently down 1.88% at $49.66 per barrel and gold fell 0.21% to $1,316.36 an ounce.


Banks slipped following Carney's comments.U.K. rates have been at historic lows of 0.5% since March 2009 and before the Brexit debacle the Bank of England was expected to embark on a cycle of rate rises.

Royal Bank of Scotland (RBS) - Get Report and Lloyds Banking Group (LYG) - Get Report were among the leading decliners on the FTSE 100, down 4.8% and 2.6%, respectively.

In Frankfurt Deutsche Bank (LYG) - Get Report pared earlier losses to close down 1.3%. A U.S. unit once again on Wednesday failed a Federal Reserve stress test.

Banco Santander, which was in the same boat, fell 1.4% in Madrid.

UniCredit (UNCFF) ended up 2.3% after a rollercoaster day in which trading was briefly suspended after the stock plunged on capital worries. The bank announced it had hired former UniCredit insider Jean-Pierrer Mustier as new CEO to replace Fedrico Ghizzoni. Mustier previously led the UniCredit investment banking arm and had the same role at France's Societe Generale.

In London online clothing retailer Asos (ASOMY) rose more 5.8% after hosting a capital markets day for investors that analysts at both Jefferies and Peel Hunt called impressive.

Jefferies said the impact on the retailer of Brexit was difficult to assess. But it added: "Historically in periods of sterling weakness, ASOS have been able to drive revenue growth given the more attractive price proposition and that seems likely to be the case with all things Brexit."

And hip replacement maker Smith & Nephew closed up 2.6% as at 1,267 pence after Jefferies lifted its price target to 1,420 pence from 1,375 pence while maintaining its buy recommendation.