By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- European stocks rallied, but the euro
sank to a more than one-year low Thursday after the European
Central Bank cut interest rates and unveiled a bond-buying plan as
it battles low inflation in the eurozone.
ECB decision: Policy makers at the central bank cut three key
interest rates by 0.1% percentage point each. The refinancing rate
was lowered to 0.05%, the marginal lending rate to 0.3% and the
rate on the deposit facility to negative 0.2%. In addition, ECB
President Mario Draghi announced plans to begin purchasing a broad
portfolio of euro-denominated covered bonds as well as asset-backed
securities.
The ECB also cut its 2014 inflation forecast to 0.6% from a
previous estimate of 0.7%.
Also read: The reluctant firefighters at the ECB start dousing
the flames
Market reaction: The euro (EURUSD) fell more than a penny, or a
hefty 1%, against the U.S. dollar, trading below $1.30 for the
first time since July 2013, according to FactSet data. The shared
currency bought $1.2927 compared with $1.3132 on Wednesday.
The Stoxx Europe 600 rose 1.1% to 348.89, touching intraday
highs after the ECB announcements. Italy's FTSE MIB and Spain's
IBEX 35 surged 2.8% and 2%, respectively, as investors bought up
Spanish and Italian stocks as well as bonds "as the search for
yield intensified," wrote Michael Hewson, chief market analyst at
CMC Markets UK, to clients.
Germany's DAX 30 index rose 1% to 9,724.26. France's CAC 40 rose
1.7% to 4,494.94, as only two components finished lower in Paris
trade.
Movers: Scottish insurer Standard Life headed advancers on the
Stoxx 600, jumping 8.1% on the company's plan to return 1.75
billion pounds ($2.88 billion) to investors as the company agreed
to sell its Canadian assets to Manulife Financial .
BP PLC (BP) dropped 5.9%, hit in late afternoon trade after a
federal judge in New Orleans ruled the British oil major was
grossly negligent in the 2010 Deepwater Horizon rig explosion and
oil spill. The slide in BP shares pared the U.K. FTSE 100's gain to
0.1%.
Bilfinger SE shares were the Stoxx 600's worst performer,
sliding 9.5% after the German construction and services company
issued a warning on profit for the third time in three months.
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