Europe: Stocks, bonds steady after rising on emergency Federal Reserve cut

[LONDON] European stocks and bonds steadied after a brief spike in reaction to the US Federal Reserve's emergency 50 basis point rate cut on Tuesday, which was aimed at countering the economic fallout from the fast-spreading coronavirus.

The first inter-meeting rate cut since 2008, to a target range of 1.00 per cent to 1.25 per cent, came a few hours after global policymakers pledged to address the wider impact of the coronavirus outbreak.

"The fundamentals of the US economy remain strong. However, the coronavirus poses evolving risks to economic activity," the Fed said.

The pan-European Stoxx 600 index jumped as much as 3.2 per cent to session highs before paring gains to stand 2.1 per cent higher by 1518 GMT.

"We were in the camp that monetary policy can't solve the uncertainty of this crisis," said Neil Dwane, global strategist and portfolio manager at Allianz Global Investors.

"Like in the financial crisis though, when the Fed does things out of plan, I feel it is more unnerving than reassuring."

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German bond yields briefly fell but 10-year paper was last little changed at -0.61 per cent. Italian bond yields extended their decline with 10-year yields down 9 bps on the day at 1.06 per cent.

Britain's pound meanwhile rose further and was last up 0.5 per cent at US$1.2825.

REUTERS