Wed 04 Mar 2020 – 06:08 AM
[LONDON] European stocks and bonds leveled off after a brief spike in response to the US Federal Reserve’s emergency cut of 50 basis points on Tuesday, which aimed to counter the economic fallout from the fast-spreading coronavirus.
The first inter-meeting rate cut since 2008, to a target range of 1.00% to 1.25%, came hours after global policy makers committed to dealing with the wider impact of the coronavirus epidemic.
“The fundamentals of the US economy remain solid. However, the coronavirus poses evolving risks to economic activity,” said the Fed.
The pan-European Stoxx 600 index jumped 3.2% to peak session before trimming gains to 2.1% by 1518 GMT.
“We were on the side that monetary policy cannot resolve the uncertainty of this crisis,” said Neil Dwane, global strategist and portfolio manager at Allianz Global Investors.
“As in the financial crisis, when the Fed does things off the plan, I think it’s more annoying than reassuring.”
German bond yields fell briefly, but the 10-year paper changed little for the last time at -0.61%. Italian bond yields continued to decline with 10-year yields down 9 basis points on the day to 1.06%.
In the meantime, the British pound further increased and rose 0.5% for the last time to US $ 1.2825.
REUTERS