European stocks rise on ECB rate cut

Europe's stock markets rose and the euro tumbled against the dollar on Thursday after the European Central Bank cut key rates to a record low in its latest effort to help break the eurozone from recession.

At the close after choppy trade following the rate cut, London's FTSE 100 index of top companies rose 0.15 percent to 6,460.71 points.

In Frankfurt, the DAX 30 rose by 0.61 percent to 7,961.71 points, while in Paris the CAC 40 edged up 0.05 percent to 3,858.76 points as the two markets re-opened following Wednesday's public holiday.

As widely expected, the ECB decided to reduce its key interest rates amid mounting calls across the eurozone to focus on growth rather than austerity.

"The market got what it wanted," said Renaud Murail of Barclays Bourse in Paris, with limited price movement as traders "had already started integrating the decision in the rebound of recent days."

The rate cut quickly impacted foreign exchange activity however, where the European single currency initially skyrocketed to $1.3202 in the wake of the decision before tumbling to $1.3060 from $1.3180 late Wednesday.

The ECB trimmed its key "refi" refinancing rate by a quarter of a percentage point to a new record low of 0.50 percent.

The central bank also cut its marginal lending facility by half a percentage point to 1.00 percent.

But it held the interest rate on the deposit facility unchanged at zero percent.

IHS Global Insight analyst Howard Archer said the move had "looked ever more inevitable as latest data and survey evidence pointed to ongoing and widespread economic weakness across the eurozone as well as below target and receding inflation."

Analysts believe the rate cut was unlikely to have a major impact on growth, especially given fragmented credit markets.

There was more gloom ahead of the rate call, with markets digesting news that activity among eurozone manufacturers fell at the fastest pace in four months in April.

The Markit Eurozone Manufacturing Purchasing Managers Index fell to 46.7 points in April from 46.8 points in March. The data is based on a poll of manufacturing executives.

The April outcome left the indicator below the 50-points boom-bust line, but beat market expectations for a reading of 46.5 according to Dow Jones Newswires.

"Eurozone PMI manufacturing for April came in broadly in line with expectations... but still the lowest reading since late 2012," said ETX Capital strategist Ishaq Siddiqi.

"The manufacturing sector is still in contraction zone, unemployment levels are at record highs and austerity is crippling the eurozone."

On the London Bullion Market, gold rose to $1,455.20 an ounce from $1,454.75.

US stocks gained sharply Thursday after the expected ECB interest rate cut and a strong report on US jobless claims.

In midday trade, the Dow Jones Industrial Average gained 0.82 percent at 14,821.02.

The broad-based S&P 500 added 0.88 percent at 1,596.60, while the tech-rich Nasdaq Composite Index surged 1.17 percent to 3,337.74 points.

The gains came as new claims for US unemployment benefits -- an indicator of the pace of layoffs -- fell by 18,000 to 324,000, the lowest level since mid-January 2008.

Traders also digested Wednesday's decision by the Federal Open Market Committee (FOMC) to hold its key interest rate at zero to 0.25 percent.

The central bank also kept its $85-billion-a-month bond-buying programme in place but left the door open to step up bond purchases if the economy slowed under the government's severe "sequester" spending cuts.

Asian equities slid Thursday with Hong Kong stocks down 0.30 percent and Tokyo off 0.76 percent.

Shanghai was down 0.17 percent, one day after official data showed that manufacturing activity in China slowed last month.