European shares gain on Bank of England triple whammy

By Sagarika Jaisinghani and Medha Singh

(Reuters) – European shares rose on Wednesday for the first time in five sessions, as the Bank of England made an emergency half-point cut to interest rates and launched a package of other measures to combat a coronavirus-driven economic slowdown.

The benchmark STOXX 600 <.STOXX> was up 1.6%, with London’s FTSE 100 <.FTSE> rising 1.2% after the BoE unexpectedly cut rates, joining a slate of central banks including in the United States, China, Canada and Australia.

The move also lifted sentiment in Germany <.GDAXI>, France <.FCHI> and Spain <.IBEX>, with bourses there adding between 1.9% and 2.2% following four days of declines driven by the virus and a weekend collapse in oil prices.

“This was the way for the BoE to show the markets that they are prepared,” said Elwin de Groot, head of macro strategy at Rabobank.

“It’s not going to help the economy in a major way but it may smoothen the economic impact and it may also allow for a smoother recovery.”

European stock markets had attempted a rebound on Tuesday from the worst global sell-off since the 2008 financial crisis, but ended lower after a jump in infections across the bloc. [MKTS/GLOB]

With Italy in total lockdown and business activity in danger of grinding to a halt, governments and central banks in the European Union have scrambled to come up with ways to protect the economy from sliding into recession.

The executive arm of the EU said on Tuesday it would set up a joint investment fund with firepower of 25 billion euros ($28 billion) from existing resources, but stopped short of adding fresh funds to the basket.

All eyes are now on the European Central Bank policy meeting on Thursday, with expectations running high of another rate cut from the bloc.

ECB President Christine Lagarde was reported as having told EU leaders in a conference call on Tuesday night that policymakers were looking at all tools ahead of the meeting, particularly ones to provide “super-cheap” funding.

Her comments sent the euro zone banking index <.SX7E> soaring 3.9%, with gains on the STOXX 600 led by Santander , HSBC and BNP Paribas .

In news-driven moves, Knorr Bremse , a German maker of braking systems for rail and commercial vehicles, jumped 8.4% to the top of the benchmark index after saying its business in China was ramping up again.

On the other hand, G4S , one of the world’s largest private security firms, tumbled 17.4% to its lowest since 2004 after posting an annual statutory loss as it took a charge related to its UK cash business. [nL4N2B41ZF}

(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Anil D’Silva and Patrick Graham)