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Stocks climb after ECB and Bank of England take further action

FRANKFURT AM MAIN, GERMANY - MARCH 12: Christine Lagarde, President of the European Central Bank, speaks to the media following a meeting of the ECB governing board at ECB headquarters on March 12, 2020 in Frankfurt, Germany. The ECB is pursuing measures to counter the economic impact of the rapidly spreading coronavirus. The number of confirmed cases across Europe has reached 25,000. (Photo by Thomas Lohnes/Getty Images)
European Central Bank president Christine Lagarde. (Thomas Lohnes/Getty Images)

Stocks in Europe climbed on Thursday after the European Central Bank announced a broad-ranging €750bn (£670bn) quantitative easing programme and the Bank of England unexpectedly cut interest rates for the second time in less than two weeks.

The pan-European STOXX 600 index (^STOXX) climbed by around 1%, and London’s FTSE 100 (^FTSE) rose by around 0.5%.

While Germany’s DAX (^GDAXI) was down by around 0.1%, France’s CAC 40 (^FCHI) was 0.6% in the green.

Read more: Bank of England cuts interest rate to record low 0.1%

The Bank of England’s monetary policy committee on Thursday voted to cut its benchmark interest rate by 15 basis points to 0.1%.

The cut takes UK interest rates to an all-time record low, below even where they sat in the wake of the financial crisis. The bank also said it would expand asset purchases by £200bn.

Stocks in the US were mixed after jobless claims rose by 70,000 to 281,000, a two-year high.

The S&P 500 (^GSPC) was down by around 0.8%. The Dow Jones Industrial Average (^DJI) was down by around 0.6%, while shares on the Nasdaq (^IXIC) climbed by around 0.8%.

Late on Thursday, the ECB said it would buy €750bn in public and private sector assets until at least the end of 2020. The programme, dubbed the Pandemic Emergency Purchase Programme, will include Greek sovereign debt for the first time.

“The ECB is combating the impact of the virus on the economy with large-scale bond purchases. From a monetary policy perspective, Christine Lagarde and her colleagues are now heavily armed and prepared to do whatever it takes,” said Marc-André Fongern of Fongern Global Forex.

Overnight, Italian and Spanish government bonds rallied, sending their yields sharply lower and reducing the spread between Italian and German bonds.

The ECB’s move will turn the focus of investors towards governments in the 19-member eurozone — some of whom have been slow to act — to increase spending to tackle the effects of the pandemic.

“The ECB has been under pressure to act appropriately. Although these emergency measures are indeed fairly encouraging, it is now up to European governments to implement a substantially more expansionary fiscal policy,” said Fongern.

The gains for European stocks followed a weak trading session in Asia.

Read more: ECB debuts €750bn package to support Europe through coronavirus

China’s SSE Composite Index (^SSEC) fell by almost 1% on Thursday, while the Hang Seng (^HSI) was down more than 2.6% in Hong Kong at market close.

Japan’s Nikkei (^N225) fell by more than 1%. The KOSPI Composite Index (^KOSPI) in South Korea closed around 8.4% in the red after the country announced 152 new coronavirus cases, reversing days of slowing infections.

Trading on the KOSPI was halted for 20 minutes after an 8% decline triggered a circuit breaker, prompting South Korea's finance ministry to announce measures to stabilise bond and stock markets.