World stocks took a breather on Thursday after a strong few weeks, while the pound lost ground as the Bank of England edged towards rate cuts and a swooning Japanese yen prompted more intervention talk in Tokyo.

The pan-European STOXX 600 was consolidating two straight record highs, although London's FTSE set a new one after the BoE and Spain was lively too as bank BBVA's 12 billion euro ($12.87 billion) courtship of rival Sabadell suddenly turned hostile.

The region's bond and FX markets had spent the morning taking it easy, but the day's big event - the Bank of England's decision to leave UK rates at the 5.25% level they have been since August - sparked them into life, as two of the bank's nine rate setters - one more than in April - voted for a cut.

It also sent a message that bets on the first cut being in August might be too conservative as it lowered its inflation forecasts for two and three years' time to 1.9% and 1.6% - below its 2% target - from its February projections of 2.3% and 1.9%.

"That's encouraging," Governor of the bank Andrew Bailey told a press conference.

Sterling fell to $1.245 from $1.2486 just before the BoE's decision and was last down 0.25%. Against the euro, the pound traded at 86.14 pence, compared to 85.96 earlier

British government bond yields, which are a proxy of borrowing costs, fell too. The interest-rate sensitive two-year gilt yield was last down 2.2 basis points at 4.29% having been at almost 4.33% earlier.

HSBC Asset Management strategist Hussain Mehdi said the BoE had now set the stage for a summer rate cut. "The question is, do they go as soon as next month in line with a likely ECB move, or wait until August," he said.

"Either way, European rate cuts are coming and we think they are likely to be delivered ahead of the Fed which remains hamstrung by stickier inflation."

Wall Street stock futures were pointing to a fractionally lower start for U.S. markets after The Dow Jones Industrial Average had stretched its winning streak to a sixth session and closed above 39,000 points on Wednesday.

Focus was set to be on jobless claims data and tech stocks again after chip blueprint designer Arm Holding's tepid full-year revenue forecast had its shares pointing almost 9% lower.

BULLS IN THE CHINA SHOP

Overnight in Asia, Chinese trade data and some property market developments had helped Chinese stocks continue their recent outperformance. MSCI's dollar-denominated China index has jumped more than 13% over the last two months.

Customs figures showed that China's imports jumped 8.4% in April from a year earlier, beating expectations for a rise of 4.8%, while exports returned to growth, meeting forecasts, in a boost to economic growth.

That helped Chinese shares build on earlier gains, with blue-chip stocks ending up almost 1% and Hong Kong's Hang Seng index increasing 1.2%. News that China's eastern metropolis Hangzhou will lift all home purchase restrictions in the ailing property sector, a key pillar of domestic demand, also boosted sentiment.

Property shares surged 2.5% as a result.

"For imports, strength was heavily concentrated in a few categories. The main theme in our view is the goal to compete in the AI race," said Lynn Song, chief economist, Greater China, at ING, adding that imports of data-processing equipment and integrated circuits have been strong.

"Considering import demand could remain resilient but exports face a higher level of risk in coming months, we expect a smaller contribution from trade to (economic) growth starting in the second quarter."

In other markets, Japan's Nikkei reversed earlier gains to finish down 0.3%. Australia's resources-heavy share market lost 1.1% while South Korea also retreated 1.2%.

Nasdaq and S&P 500 stock futures were both down around 0.2% ahead of their restarts. Uber was also looking like a drag after a surprise quarterly loss and downbeat forecast has sent its shares down 5.7%.

(Reporting by Marc Jones; editing by David Evans)