By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets moved markedly
higher on Thursday after the European Central Bank cut interest
rates and took the deposit rate into negative territory for the
first time in euro-zone history.
The Stoxx Europe 600 index climbed 0.6% to 343.65, after trading
close to the flat line earlier in the day.
The jump came after the ECB cut its key lending rate to 0.15%
from 0.25% and cut the deposit rate to -0.1% from 0%, effectively
charging banks to leave excess reserves parked at the ECB. The move
was widely expected by economists as ECB members in recent weeks
have hinted that monetary easing would be on its way.
Attention now turns ECB President Mario Draghi's news conference
at 1:30 p.m. London time, or 8:30 a.m. Eastern Time. The central
bank said in the rate release that Draghi will comment on the rate
cuts at the conference and that further monetary policy measures
will be released at 2:30 p.m. London time. Read: How to invest if
the ECB cuts rates below 0%
The euro (EURUSD) slumped after the rate cuts, trading at
$1.3569, down from $1.3606 ahead of the news.
The strong euro (EURUSD) has been cited as one of the reasons
euro-zone inflation is stuck around a four-year low and the shared
currency has been steadily declining from almost $1.40 since Draghi
hinted at upcoming stimulus measures at the ECB's May policy
meeting.
Index moves
Europe's equity benchmarks moved higher in the afternoon after
trading in tight ranges leading up to the ECB call. Germany's DAX
30 index gained 0.4% to 9,961.82, while France's CAC 40 index rose
0.7% to 4,534.37. The U.K.'s FTSE 100 index gained 0.1% to
6,825.66.
The London market already started to move into positive
territory midday after the Bank of England kept its key lending
rate at a record low of 0.5% and made no changes to its
375-billion-pound ($628 billion) asset-purchase program.
The decision was widely expected as the central bank has
signaled a rate hike won't be in the cards until 2015. However,
after a string of solid economic data, some analysts have started
to speculate that its first monetary tightening could come as early
as the fall of 2014.
Among movers in Europe, shares of Volvo AB lost 2% after UBS cut
the truck maker to sell from neutral.
Shares of BHP Billiton PLC (BHP) dropped 0.1% after RBC Capital
Markets shifted its preference within the mining space from BHP to
Rio Tinto PLC (RIO).
In data releases on Thursday, Eurostat said euro-zone retail
sales in volume terms rose 0.4% in April, compared with March.
Year-on-year, retail sales improved 2.4%, marking the strongest
annual growth rate in seven years.
Meanwhile, the Ukraine-Russia standoff remained in the
spotlight, as Western leaders gathered in Brussels for the second
day of the Group of 7 (G7) summit that kicked off on Wednesday.
U.S. President Barack Obama and European leaders warned the Kremlin
they will introduce tougher economic sanctions if Russia doesn't
stop the violence in eastern Ukraine.
More must-reads from MarketWatch:
Could the euro face a short squeeze after the ECB?
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U.K.'s economy is still vulnerable: BOE official
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