ECB stimulus draws tepid response from European stocks; banks end flat

(Reuters) - European stocks edged higher in choppy trading on Thursday, with banks underwhelmed by the European Central Bank’s stimulus measures while Washington’s move to delay tariffs on Chinese goods boosted automakers and technology firms.

FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, August 30, 2019. REUTERS/Staff

The pan-European stocks index .STOXX gained as much as 0.8% after the ECB cut its deposit rate to a record low of -0.5% from -0.4% and said it will restart bond purchases of 20 billion euros a month from November.

That initially sent bond yields tumbling, the euro down and euro zone stocks .STOXXE into positive territory.

Gains in the STOXXE index wore off as the session progressed, however, with euro zone banks .SX7E swinging on the news that the ECB was easing the terms of its cheap loan scheme to banks and introducing a tiered deposit rate.

“I don’t think this is a game changer,” said Pictet Asset Management’s chief strategist Luca Paolini.

“Even if it was a positive surprise in some areas, there were negative surprises overall. They basically did what the market expected and they’ve done it many times in the past.”

Euro zone banks - one of the main beneficiaries of an investor pivot into value stocks in recent days - closed 0.24% higher, while broader European banks .SX7P finished unchanged.

Italian banks .FTIT8300, which have big holdings of sovereign bonds, were an outperformer with a 1.2% gain, owing to a recent surge in Italian government bond prices.

Trade headlines also swayed markets, with automakers .SXAP jumping on a report that the Trump administration was considering an interim deal with China, although CNBC said that a senior White House official denied the report.

Offering relief to battered financial markets, President Donald Trump said the United States would delay increasing tariffs on $250 billion worth of Chinese imports by two weeks as “a gesture of good will”.

Optimism about a de-escalation in the economically damaging China-U.S. trade war and expectations of monetary stimulus from the ECB have led major European indices to track higher this week.

Energy stocks .SXEP were a big drag, falling 1.3%, as oil prices fell on oversupply concerns. [O/R]

Among individual stocks, Anheuser-Busch InBev ABI.BR was the biggest boost to the STOXX 600 after the company said it would again explore an initial public offering in Hong Kong for its Asia Pacific unit two months after cancelling the planned listing.

Conversely, transportation firm Alstom ALSO.PA fell 4.9% after French conglomerate Bouygues BOUY.PA halved its stake in the company.

Reporting by Sruthi Shankar and Agamoni Ghosh in Bengaluru; Editing by Sonya Hepinstall