European stocks pause after rally, ECB stimulus boosts banks

By Sruthi Shankar

(Reuters) - A strong rally this week in European stocks stalled on Thursday as investors locked in profits, although euro zone banks surged after the European Central Bank ramped up its stimulus programme to prop up the coronavirus-hit economy.

The euro zone stock index <.STOXXE> closed 0.2% lower after falling as much as 0.8% earlier in the session, but the bloc's lenders <.SX7E> gained 1.1%.

The ECB said it would increase the size of emergency bond buying by a wider-than-expected 600 billion euros ($674 billion) to 1.35 trillion euros and that the purchases would run until the end of June 2021, six month longer than originally planned.

An index of Italian banks <.FTIT8300> jumped 1.1%, while Spanish lenders BBVA (NYSE: BBVA) and Banco Santander (NYSE: SAN) gained nearly 1.7%.

However, the pan-European STOXX 600 <.STOXX> fell 0.7%, led by declines in automakers <.SXAP>, utilities <.SX6P> and healthcare stocks <.SXDP>.

"Monday, Tuesday and Wednesday were a great run with the expectation of additional easing," said David Madden, market analyst at CMC Markets."We got that and now it seems that traders are taking the money off the table for now."

Equity markets have bounced strongly this week, with Wall Street's tech-heavy Nasdaq <.IXIC> hovering below record levels, on signs of recovery from a coronavirus-forced recession, optimism over a vaccine and hopes of more stimulus.

Germany's coalition parties agreed a 130-billion-euros stimulus package to speed recovery on Wednesday, but shares in Daimler and Volkswagen fell between 1% and 2.5% as the measures favoured electric cars.

Germany unveiled a staggered tax on vehicles emitting large amounts of carbon dioxide (CO2), hitting sports utility vehicles. Shares of car parts suppliers such as Continental (NYSE: CONG) and Valeo were down 2.9% and 4%.

Airbus (NYSE: AIR) jumped 5.2% after a report said it was looking to hold underlying jet output at 40% below pre-pandemic plans for two years, an approach which adds new pressure to cut thousands of jobs.

French spirits company Remy Cointreau surged 11.3% after it predicted a strong recovery in the second half, driven by China and the United States.

German sportswear firm Adidas gained 1.8% as it said sales had returned to growth in greater China faster than it had expected after the coronavirus lockdown.

($1 = 0.8925 euros)

(Reporting by Sruthi Shankar in Bengaluru; additional reporting by Joice Alves in London; Editing by Arun Koyyur, Saumyadeb Chakrabarty and Andrew Cawthorne)

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