European markets climbed on Wednesday after the Bank of England introduced a series of emergency measures to curb the economic impact of the coronavirus outbreak on the UK.
In London, the FTSE 100 (^FTSE) rose by around 0.8%, with investors widely expecting the central bank’s manoeuvres to coincide with the announcement of a government spending package in Wednesday’s budget.
The Bank of England slashed interest rates by 50 basis points, to 0.25%, and introduced a new funding scheme for loans to SMEs, in a move that could see banks provide more than £100bn in credit to businesses affected by the fallout.
The bank also reduced a key capital buffer to 0%, in a move that it said would “further the ability of banks to supply the credit needed to bridge a potentially challenging period.”
The package was agreed at an emergency meeting of the bank’s Monetary Policy Committee on Tuesday.
It forms part of what the Bank of England calls a “comprehensive and timely package of measures to help UK businesses and households bridge across the economic disruption that is likely to be associated with COVID-19.”
Questioning the efficacy of the bank’s decision to slash its benchmark rate, Michael Hewson, the chief market analyst at CMC Markets said that “lower rates won’t get people travelling or spending if they are self-isolating.”
“The key component of this morning’s announcement was the decision to roll out a new term funding scheme, with additional incentives for SMEs, financed by central bank reserves, at £100bn,” Hewson said on Wednesday.
The gain for European stocks followed sharp losses in Asia.
Futures are pointing to a lower open for US stocks on Wednesday.