European stocks drifted lower Thursday, while U.K shares notched modest gains as investors re-set assumptions for growth and inflation and grappled with the ongoing volatility in global fixed income markets.

Britain's FTSE 100 added around 7 points, or 0.1% by 10:00 GMT as basic material and consumer cyclical stocks crept higher. Major European markets, however, drifted lower, led by Germany, where the DAX fell around 45 points, or 0.4% by 11:00 CET. In France, the CAC-40 slipped 6 points, or 0.13%.

One early downside mover of note in the U.K. were shares in Virgin Money Holdings, which fell 6% at the open after a disclosure from BofA Merrill Lynch showed that U.S. billionaire Wilbur Ross's WL Ross & Co. had sold his 27 million-share stake in the so-called 'challenger' bank, representing 6.1% of its equity capital, or £171 million ($213 million). 

Much of the recent market direction in the 8 days following Donald Trump's surprise U.S. election victory has been dictated by bets on his expected fiscal policies, which have driven the dollar to a 14-year high against a basket of global currencies and slammed bond investors with more than $1 trillion in losses as yields jumped in anticipation of faster inflation and speedier Federal Reserve rate hikes. 

However, government bonds found a firm bid overnight in Asia, when the Bank of Japan stepped in to stem rising yields on benchmark JGBs by offering to buy unlimited quantities of 2-year and 5-year debt. The move pushed yields, which move in the opposite direction to prices, sharply lower.

The bid pressure spilled over into both U.S. Treasuries and European government bonds, both of which saw notably lower yields in early London trading. Benchmark 10-year German bunds were quoted at 0.28% while 10-year Treasury yields fell to 2.19%.

One exception to the downward trend in yields appears to be playing out in U.K. government bonds, which are known as Gilts. Benchmark 10-year notes were little-changed at 1.26% in early London trading following a report in the Financial Times that suggested Britain's vote to leave the European Union will create a budget gap of at least £100 billion.

In currency markets, the pound traded around 0.24% higher, at 1.2470 against the U.S. dollar, following better-than-expected retail sales data from the Office for National Statistics, which said sales rose 1.9% from September, nearly four time faster than analysts' forecast.

The European single currency, which flirted with 52-week lows overnight, added 0.3% to trade at 1.0723 against the U.S. dollar, adding value after Eurostat, the region's official statistics office, confirmed euro zone inflation for October at a two-year high of 0.5%.

Global oil prices drifted lower overnight and extended those losses modestly into the European session, following U.S. energy department figures which showed domestic crude inventories rose by a more-than-expected 5.3 million barrels in the week ending November 11, well ahead of the 1.5 million consensus estimate.

The early London dollar weakness, however, has helped lift Nymex light sweet crude prices 0.4% to $46.20 per barrel.

More from Markets

Trump Takes Aim at Auto Imports; Markets End Mixed -- ICYMI

Trump Takes Aim at Auto Imports; Markets End Mixed -- ICYMI

Video: What Oprah's Content Partnership With Apple Means for the Rest of Tech

Video: What Oprah's Content Partnership With Apple Means for the Rest of Tech

REPLAY: Jim Cramer on the Markets, Oil, Starbucks, Tesla, Okta and Red Hat

REPLAY: Jim Cramer on the Markets, Oil, Starbucks, Tesla, Okta and Red Hat

Flashback Friday: The Market Movers

Flashback Friday: The Market Movers

OPEC Deal Doesn't Boost Production Enough to Drive Down Crude, Gasoline Prices

OPEC Deal Doesn't Boost Production Enough to Drive Down Crude, Gasoline Prices