UPDATE 2-European shares rise as traders bet on more stimulus after Fed rate cut

* Fed cuts rates by 50 basis points in emergency move
* European banks lag broader rally
* Spanish banks rise on ECJ ruling on mortgage rates
* Qiagen soars on Thermo Fisher bid

(Adds comments, details; updates prices)
By Sruthi Shankar and Sagarika Jaisinghani
March 3 (Reuters) - European shares rose on Tuesday, as
investors counted on further monetary stimulus by central banks
after the U.S. Federal Reserve cut interest rates in an
emergency move to cushion the economic impact of the coronavirus
epidemic.
The Fed was among the first G7 countries to reduce borrowing
costs by half a percentage point, shortly after the group said
it was ready to take action, including fiscal measures where
appropriate. The pan-European STOXX 600 index .STOXX closed up 1.4%
after surging as high as 3.3% immediately after the rate cut.
Central banks in Britain, Japan and France have also
signalled willingness to ease policy measures after a worldwide
sell-off last week that erased more than $5 trillion from equity
markets.
"The ECB is unlikely to follow through with a rate cut, but
like the Fed, will start tweaking bank regulations to deal with
what is a transient shock," said Sebastien Galy, senior macro
strategist at Nordea Asset Management in Luxembourg.
"Central banks are by nature stabilizers in the system and
the Fed is showing the way."
Growth-linked travel and leisure stocks .SXTP ended 1.5%
higher, after eight straight days of declines as widespread
travel curbs to contain the outbreak crushed passenger numbers
and dented demand at hotels.
Of the 21 European sub-sectors, only banks .SX7P closed
out the session lower. Financial services companies tend to
outperform in a higher interest rate environment.
The benchmark index is still about 12% shy of a February
peak, reflecting the scale of the hit investors expect from the
virus.
After a decade of cash injections from central banks,
analysts also question if monetary stimulus will be enough this
time round.
"The fear is that there is going to be a huge dip in
consumer spending," said Jake Dollarhide, chief executive
officer at Longbow Asset Management.
"This bull market is driven by the consumer so the
coronavirus fear is that the consumer is going to be cut off
from buying iPhones, steak dinners and Louis Vuitton."
Spanish banks powered a 0.8% rise for the Madrid bourse
.IBEX after the European Court of Justice ruled that it would
be up to local judges to decide on a case-by-case basis if IRPH
mortgage clauses were abusive. Caixabank SA CABK.MC and Bankia BKIA.MC rose 0.6% and
3.7%, respectively, on relief that the court did not decide on a
blanket rejection of the clause.
Among individual movers, German wholesaler Metro B4B.DE
soared 19.2% to the top of the STOXX 600 after U.S. food
distributor Sysco SYY.N contacted the company about a
potential takeover, a person familiar with the matter told
Reuters on Tuesday. Qiagen NV QIA.DE jumped 17% after U.S. firm Thermo Fisher
Scientific TMO.N launched a 10.4 billion euro ($11.6 billion)
bid for the German genetic testing company.

Get The App

Join the millions of people who stay on top of global financial markets with Investing.com.

Download Now