European shares lower ahead of ECB meeting

European shares pulled back slightly on Thursday after a strong rally this week, with investors focussed on a European Central Bank meeting where policymakers are expected to provide more aid for the battered euro zone economy.

The pan-European STOXX 600 index slipped 0.4%, but held near its early March highs, while eurozone stocks were also down 0.4%. Automakers and banks led the declines falling 2.3% and 1.7%, respectively.

Equity markets have bounced strongly this week, with Wall Street’s tech-heavy Nasdaq nearing record levels as signs of recovery from a coronavirus-forced recession, optimism over a COVID19 vaccine and hopes of more stimulus boosted risk appetite.

Investors expect the ECB to upsize bond purchases by 500 billion euros, but the only question is whether it will act on Thursday or hold out until July as a deal on European Union-wide fiscal support strengthens the case for patience.

Euro zone banks were down 1.7% after the broader market recovery pulled the index up nearly 30% from its record low. Meanwhile, Germany’s coalition parties agreed a 130-billion-euros stimulus package to speed up a recovery from the crisis on Wednesday, but shares in Daimler, BMW and Volkswagen slid between 2% and 4.2% as the packaged favoured electric cars. Germany also unveiled a staggered tax on vehicles emitting large amounts of carbon dioxide hitting sports utility vehicles. Shares of car parts suppliers such as Continental and Valeo were down 1.7% and 2%.

French spirits company Remy Cointreau jumped 6.4% after it predicted a strong recovery in the second half, driven by China and the United States. German sportswear firm Adidas gained 1.3% as it said sales had returned to growth in greater China faster than it had expected after the coronavirus lockdown.

Asian shares rose to a twomonth high as government stimulus expectations supported investor confidence in an economic recovery from the global coronavirus pandemic. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.4%, earlier touching the highest since March 9.