LONDON (Reuters) - European stocks bounced off intraday lows on Thursday after Britain slashed interest rates by 1.5 percentage points to 3 percent, their lowest level in more than half a century.
The Bank of England's shock move prompted a bounce in UK stocks and a brief fall for sterling but market reaction was clouded by fears that the dramatic cut suggested the British economy maybe in even more trouble than had been thought.
The Swiss National Bank also eased interest rates by 50 basis points, taking its target range to 1.5-2.5 percent.
The aggressive reductions come as more data highlighted the scale of a slowdown in the global economy.
German manufacturing orders suffered the biggest fall since reunification in 1990 in September while UK house prices fell at their sharpest rate in at least a quarter of century in October.
UK and Swiss moves follow interest rate cuts from the United States, China and Japan last week, whose economies are all feeling the effect of the global credit crisis.
"It's a spectacular move but there is still more to do. At 3 percent, UK interest rates are still well above U.S. ones when economic conditions suggest they should be as low if not lower," said Jonathan Loynes, economist at Capital Economics. MSCI world equity index was down 2.1 percent, having been down as much as 3 percent earlier.
The FTSEurofirst 300 index of European shares were down 1.7 percent, coming off earlier lows.
Sterling fell as low as $1.5722 from around $1.5860 shortly before the announcement. But it then recovered those losses and more.
Britain's FTSE 100 stock index pared losses, to stand down 2.0 percent by 7:30 a.m. EST.
"The more significant the banks cut rates and the more dovish related statements the better the chance of seeing equity markets stabilizing and currencies rallying thereafter," BNP Paribas said in a note to clients.
"A more conservative approach could lead to substantial equity losses taking currencies with it."
The December bund futures rose 72 ticks before the European Central Bank announces its interest rate decision at 7:45 a.m. EST.
