European stocks ease as BoE to unveil more stimulus

LONDON (AFP) - European stock markets eased yesterday after recent gains, with the Bank of England set to unveil more massive cash stimulus for Britain’s virus-hit economy. Earlier, Asian equity indices closed mixed after a two-day rally, with traders weighing concerns about a new wave of coronavirus infections against massive monetary easing and stimulus measures.

The Bank of England is widely expected on Thursday to announce cash stimulus worth at least £100 billion (US$ 123 billion, 110 billion euros), according to analysts, after the UK economy contracted by one fifth in April amid a nationwide lockdown triggered by the coronavirus outbreak.

The British pound was down against the dollar and euro awaiting the outcome of the BoE’s latest monetary policy meeting at 1100 GMT. “Some traders are speculating the stimulus package will be upped by £150 billion,” said David Madden, analyst at CMC Markets.

With £445 billion in cash already swirling around the UK economy to support the economy over the past decade following the global financial crisis and amid Brexit uncertainty, the BoE hiked the amount by £200 billion and slashed its interest rate to a record-low 0.1 percent in the wake of COVID-19.

The BoE was not expected to cut borrowing costs further Thursday, seemingly wanting to avoid negative interest rates.

“Once you go negative, it’s very hard to get back to normal,” said Neil Wilson, chief market analyst at Markets.com.

Central bank and government financial support worldwide, along with the easing of lockdown restrictions, the opening up of economies and positive data have provided support to global equities in recent weeks.

But there is a growing sense that traders may have got ahead of themselves and observers warn markets could be in line for a pull-back unless there is a major event to move higher, such as the development of a vaccine.

While countries are slowly reopening their economies with flights resuming, bars, cafes and restaurants serving people and professional football returning -new infections continue to surge in some places and are flaring up again in others.

Eyes are on Beijing, which has imposed new lockdowns, reclosed schools and banned flights again after the emergence of new clusters linked to markets, while there have also been massive spikes in Texas and Florida.