* ECB shocks with further cuts to all main interest rates
* Stock markets up across the board
* Asian, European markets just off multi-year highs
* Sources tell Reuters bank also looking at early asset
* U.S. jobs data, ECB news conference eyed
By Patrick Graham
LONDON, Sept 4 European stock markets surged and
the euro sank on Thursday after the European Central Bank
surprised by cutting already ultra-low interest rates to prop up
a struggling economy.
Faced with signs of further deterioration in the euro zone's
prospects, the central bank cut all of its interest rates by
another 10 basis points to new record lows, putting its deposit
rate further into negative territory.
European stock values jumped around half a percent in
response, while the euro sank as much as a cent on the
"It's a surprise. Euro/dollar is getting slammed. The DAX
should go up from here," said Darren Courtney-Cook, head of
trading at Central Markets Investment Management.
Sources familiar with the ECB's discussions told Reuters
that officials had also been looking at plans to launch an
asset-backed securities (ABS) and covered bond purchase
programme worth up to 500 billion euros. The first such
purchases, if approved, could be made this year.
Nothing on the asset purchase programme was announced with
the bank's regular policy statement on interest rates at 1145
GMT. President Mario Draghi gives his regular and more detailed
update on the bank's outlook starting at 1230 GMT.
"If it turned out to be true, the market would be delighted
to see the ECB move in the direction of ABS purchases," Chris
Beauchamp, a strategist at IG, said.
European share markets, after falling in early deals, were
up across the board. Spanish, French and Portuguese stocks all
gained almost a full percentage point , while
Germany's DAX rose 0.3 percent.
That pushed the blue chip FTSEurofirst index up 0.7 percent
on the day.
The euro, already suffering from expectations of more policy
loosening by the ECB, fell to a session low of $1.3036.
A month-long march higher for European and Asian stock
markets had stalled earlier in the day on concerns the bank
would do nothing immediate at the September meeting to address a
deteriorating economic outlook.
With economies across Europe sputtering, that shares are
near their highest levels since the 2007-8 financial crisis is
chiefly a reflection of the billions in stimulus pumped into the
financial system by central banks over the past five years.
The U.S. Federal Reserve is on the verge of halting its own
programme of bond-buying, encouraged by a steady stream of
reasonably encouraging signs on jobs and growth on the other
side of the Atlantic.
But the jury is still very much out on when it can raise
interest rates although the ADP jobs report later on Thursday,
followed by nonfarm payrolls on Friday, should advance the
Swiss asset managers Pictet raised their position on
European equities to "neutral" in a move emailed to clients
before the ECB move, also cutting their US stock weighting.
"European stocks have been upgraded as liquidity conditions
are improving and positioning has turned lighter as investors
have shunned the asset class for the past few months," said Luca
Paolini, chief strategist at Pictet Asset Management.
"Valuations look less extended."
(Editing by Catherine Evans)