European Stocks Advance on Dovish Central Banks and Solid Earnings

European shares held on to modest gains for the second consecutive day following dovish signals from the European Central Bank and the Bank of England.

Britain's FTSE 100 gains around 10 points, or 0.2 percent, to 6,107.84, holding to the highest levels in at least four and a half years. The region-wide FTSE Eurofirst 300 was little changed at 1,168.44.

US stocks opened firmly on Wall Street with the Dow Jones Industrial Average gaining 34.5 points, or 0.26 percent, in first few minutes of trading. The S&P 500 advanced 5.11 points, or 0.35 percent, to 1,466.13 while the Nasdaq gained 20.57 points, or 0.66 percent, to 3,126.38.

In the UK, retail shares continued to dominate trading in a big week of releases for the major store chains.

Tesco shares rose 2.4 percent to 357.65 pence each after Britain's biggest retailer posted its best domestic holiday sales figures in three years as its £1bn UK restructuring beings to bear fruit.

UK like-for-like sales in the 6 weeks ending on 5 January - not including petrol - grew by 1.8 percent, Britain's biggest retailer said in a statement published Thursday on its website, a figure the company said was largely in line with its expectations. Overall group sales for the period rose by 3.9 percent, excluding petrol, the company reported. Collectively, the sales figures were well ahead of analysts' estimates and better than its rival J Sainsbury over the key Christmas period.

The group also named Chris Bush - a 30-year veteran of the group who was recently called back from Tesco's Asia operations - as the new managing director of its UK operations but made no changes to its forecast for domestic performance and expects the broader trends it has seen so far this year continue into 2013.

On the opposite side of the ledger, Marks & Spencer Group shares fell the most in at least two years in London trading after the iconic British retailer posted disappointing holiday sales figures.

Britain's top clothing retailer reported a sixth consecutive slump in quarterly sales late Wednesday evening, with total sales for the 13 weeks ending on 29 December rose 0.3 percent, according to a company statement. Like-for-like sales, which measure trade from stores opened for at least a year, fell 1.8 percent overall and a steep 3.8 percent in the group's general merchandise unit. Food sales grew 0.3 percent, the company reported, less than analysts had anticipated.

The trading update was due to be published Thursday morning but was rushed out late Wednesday after details had apparently been leaked to Sky News.

UK bond markets were active, although not as a result of the Bank of England's wide-expected decision to hold its key lending rate at a record low 0.5 percent and make no changes to its £375bn programme of asset purchases.

Investors, rather, were buoyed by news that the Office for National Statistics decided it would make no major changes to the way in which it calculated retail price inflation, or RPI, following a two-year consultation. Inflation-protected UK government bonds surged on the surprise decision, taking yields on so-called 10 year "linkers" - which derive their value from RPI calcualtions - to a record low -0.973 percent.

The Euro hit a one week high of $1.3185 against the US dollar following the European Central Bank's decision to hold its key refinancing rate at a record low 0.75 percent.

ECB President Mario Draghi later told the media the Governing Council's decision was unanimous.

The currency was given a boost earlier in the session after Spain's Treasury raised €5.8bn in three bond auctions that pushed benchmark 10 year yields below 5 percent for the first time in nearly a year.

Spain needs to sell around €121bn in new debt this year, an 8 percent increase from 2012, and plans to auction around €10bn each month. Taking into account debt that will mature this year, the net borrowing total is €71bn.