European Stocks Rise on ECB Cut

European stocks rallied to a two-month high as the region’s central bank unexpectedly cut all its three main interest rates and said it will start buying asset-backed securities.

The Stoxx Europe 600 Index gained 1 percent to 348.33 at 1:45 p.m. in London, extending gains after the European Central Bank President Mario Draghi announced the decision to buy a “broad portfolio of simple and transparent securities.” A gauge of bank shares led gains on the index, rising to the highest level since June 20.

The Stoxx 600 has rebounded 7.2 percent from a four-month low on Aug. 8 as ECB President Mario Draghi signaled policy makers are ready to boost stimulus to combat low inflation.

Earlier today, the ECB’s 24-member Governing Council reduced all three of its main interest rates by 10 basis points each. The benchmark rate was lowered to 0.05 percent and the deposit rate was cut to minus 0.2 percent.

The volume of shares changing hands in Stoxx 600-listed companies was 39 percent greater than the 30-day average for this time of the day, according to data compiled by Bloomberg.

In the U.K., the Bank of England maintained its benchmark rate at 0.5 percent, the level it held since March 2009, as predicted by economists surveyed by Bloomberg News.

Stimulus measures have helped the Stoxx 600 rally about 62 percent from a low in September 2011. Since taking over in November of that year, Draghi has pledged to hold borrowing costs low and said in July 2012 he would do “whatever it takes” to save the euro.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza