European stock index futures drop after surprise BOJ policy shift

German share price index DAX graph is pictured at the stock exchange in Frankfurt
The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, December 19, 2022. REUTERS/Staff

Dec 20 (Reuters) - European stock index futures fell on Tuesday after Bank of Japan rattled markets with a surprise policy shift that would allow long-term interest rates to rise more.

Futures on the EURO STOXX 50 index and Germany's DAX briefly fell more than 1% each, before steadying at 0.9% declines by 0710 GMT.

The BOJ decided to allow the 10-year bond yield to move 50 basis points either side of its 0% target, wider than the previous 25 basis point band, in a move aimed at easing some of the costs of prolonged monetary stimulus.

The policy tweak was widely seen as the beginning of a potential end to Japan's ultra-loose monetary policy and comes just as hawkish messages from other major central banks last week doused hopes of an end to monetary policy tightening any time soon.

London's FTSE 100 index futures dipped 0.5%.

Reporting by Amruta Khandekar; Editing by Saumyadeb Chakrabarty

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