European stocks boosted by Fed rate cut

European stock indexes were solidly higher on Tuesday following a surprise rate cut by the US Federal Reserve, but off their peaks as analysts wondered about the real-world impact of the monetary policy move.

At 1530 GMT, London's FTSE index was up 1.9 per cent, Frankfurt was 1.8 per cent higher and the Paris CAC index was up 1.8 per cent as traders welcomed the Fed's action as a concrete step to help shield the economy from the impact of the spreading coronavirus.

In a unanimous decision, the Fed's policy-setting committee slashed its key interest rate by a half point to a range of 1.0-1.25 per cent.

"The Fed has proved today that it is willing to do whatever it takes to keep the bull market alive," said AvaTrade analyst Naeem Aslam, calling the Fed's move "aggressive".

But analysts also noted that key European indexes had pulled back from gains of over three percent reached in their initial reaction.

James Knightley, Chief International Economist at ING, said there were question marks about how effective monetary easing was going to be.

"We doubt today's policy action will trigger a meaningful boost to aggregate demand, but implementing rate cuts may help to mitigate some potential strains in the financial system and give a lift to sentiment," he said.