Europe: Stocks pause after rally, ECB stimulus boosts banks

[BENGALURU] A strong rally this week in European stocks stalled on Thursday as investors locked in profits, although euro zone banks surged after the European Central Bank ramped up its stimulus programme to prop up the coronavirus-hit economy.

The euro zone stock index closed 0.2 per cent lower after falling as much as 0.8 per cent earlier in the session, but the bloc's lenders gained 1.1 per cent.

The ECB said it would increase the size of emergency bond buying by a wider-than-expected 600 billion euros (S$950.71 billion) to 1.35 trillion euros and that the purchases would run until the end of June 2021, six month longer than originally planned.

An index of Italian banks jumped 1.1 per cent, while Spanish lenders BBVA and Banco Santander gained nearly 1.7 per cent.

However, the pan-European Stoxx 600 fell 0.7 per cent, led by declines in automakers, utilities and healthcare stocks.

"Monday, Tuesday and Wednesday were a great run with the expectation of additional easing," said David Madden, market analyst at CMC Markets."We got that and now it seems that traders are taking the money off the table for now."

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Equity markets have bounced strongly this week, with Wall Street's tech-heavy Nasdaq hovering below record levels, on signs of recovery from a coronavirus-forced recession, optimism over a vaccine and hopes of more stimulus.

Germany's coalition parties agreed a 130-billion-euros stimulus package to speed recovery on Wednesday, but shares in Daimler and Volkswagen fell between 1 per cent and 2.5 per cent as the measures favoured electric cars.

Germany unveiled a staggered tax on vehicles emitting large amounts of carbon dioxide, hitting sports utility vehicles. Shares of car parts suppliers such as Continental and Valeo were down 2.9 per cent and 4 per cent.

Airbus jumped 5.2 per cent after a report said it was looking to hold underlying jet output at 40 per cent below pre-pandemic plans for two years, an approach which adds new pressure to cut thousands of jobs.

French spirits company Remy Cointreau surged 11.3 per cent after it predicted a strong recovery in the second half, driven by China and the United States.

German sportswear firm Adidas gained 1.8 per cent as it said sales had returned to growth in greater China faster than it had expected after the coronavirus lockdown.

REUTERS