* BoE announces surprise 50 bps cut to tackle coronavirus
shock
* Move raises pressure on ECB to act on Thursday
* European shares follow Wall Street with rebound
* Oil falls after Saudi Aramco announces more production
* Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, March 11 (Reuters) - European stocks rose on
Wednesday after the Bank of England joined other central banks
in cutting interest rates, raising hopes for more co-ordinated
monetary and fiscal stimulus to counter the economic shock from
the coronavirus outbreak.
The surprise move from the BoE which - on the day that
Britain's budget is set to open the taps on spending - also
announced measures to support bank lending, lifted shares after
a lacklustre session in Asia. Wall Street had rallied significantly on Tuesday, helping
reverse some of Monday's brutal losses, but that failed to
translate into improved sentiment on Wednesday as scepticism
grew about the stimulus package announced by Washington to fight
the epidemic.
By 0855 GMT, the FTSE 100 .FTSE had risen 1.73%, the Euro
Stoxx .STOXXE was 2.67% ahead and Germany's DAX .GDAX was
2.65% higher.
U.S. stock futures ESc1 were down 1.2%, although that was
up from the 3% losses before the BoE's 50-basis-point cut in the
base rate to 0.25%. MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS fell 1.05%.
With the Federal Reserve having already cut rates this
month, the pressure is on the European Central Bank to act when
it meets on Thursday.
The BoE did not announce any new quantitative easing but it
did launch a new scheme to support lending to small businesses.
The UK finance minister is due to present his first annual
budget shortly after 1230 GMT.
"It is the only thing central banks can do in a public
health crisis," Neil Dwane global strategist and portfolio
manager at Allianz Global Investors. "They are trying to take
the shackles off the banks to ensure we don't get a cash
crunch."
Still, after a decade of extraordinary monetary policy,
investors say the impact of easier policy has clear limits, and
increased government spending must bear the brunt of the policy
response to the economic consequences of the outbreak.
"For the ECB their problem is that there is even more
pressure because they face the third largest euro zone economy -
Italy - in dire straits," Dwane said.
As of Tuesday's close, $8.1 trillion in value has been
erased from global stock markets in the recent rout.
The MSCI all-country index .MIWD00000PUS has lost more
than 15% of its value since it peaked on Feb. 12. It was
unchanged in early trading on Wednesday.
DECLINING DOLLAR
Sterling initially fell following the BoE decision before
rebounding. It was last up 0.5% at $1.2945 GBP=D3 and flat
versus the euro at 87.49 pence EURGBP=D3 .
The dollar resumed its decline against the yen JPY=EBS ,
the Swiss franc CHF=EBS and the euro EUR=EBS , weighed by
uncertainty about the U.S government's response and the drop in
U.S. Treasury yields, although the greenback remained
significantly above levels seen on Monday.
The euro rose 0.3% versus the U.S. currency to $1.1315.
Benchmark U.S. 10-year Treasury yields US10T=RR fell 4
basis points to 0.7129%, more than double Monday's record low
yield of 0.3180%.
Market participants largely expect the Fed to cut interest
rates for the second time this month at the conclusion of next
week's regularly scheduled policy meeting, after it surprised
investors last week with a 50-basis-point cut. FEDWATCH
German government bond yields rose DE10YT=RR after the BoE
cut improved sentiment, while Italian yields IT10YT=RR - which
had shot up on worries the country on the front line Europe's
virus outbreak is sliding into a recession - fell as bets on ECB
stimulus grow.
Italy is on lockdown in an attempt to slow new infections.
Karen Ward, Chief Market Strategist for EMEA at JP Morgan
Asset Management, said all eyes were now on the UK finance
minister to see if he announces a big increase in spending.
"If he does this would be the first instance of a truly
coordinated monetary and fiscal push. Investors may be comforted
by the fact that policymakers are willing to deploy their full
ammunition - moving a step closer to helicopter money," she
said.
U.S. crude CLc1 reversed earlier gains and dropped 0.7% to
$34.23 per barrel, while Brent crude LCOc1 slipped 0.21% to
$37.14 after Saudi Aramco said it had been directed by the
energy ministry to raise its production capacity.
On Monday, the oil market plunged with futures recording
their largest percentage drop since the 1991 Gulf War as Saudi
Arabia and Russia clashed openly over management of supply.
Spot gold XAU= , which is often bought as a safe-haven
during times of uncertainty, rose 0.54% to $1,657 per ounce.
GOL/
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