European shares inch lower, halting sharp rally

August 20, 2012 10:16

PARIS - European stocks inched lower early on Monday, halting their sharp rally started in late July, although the losses were limited by growing expectation of bold action from the European Central Bank to lower the borrowing costs of Spain and Italy.

A German magazine reported over the weekend that the ECB is considering setting interest rate thresholds for purchases of struggling euro zone country's bonds, a move that would discourage speculators from pushing yields above the level set by the euro zone's central bank.

"The prospect of the ECB stepping in is removing most of the systemic risks, so stock pickers are back," a Paris-based equity and ETF sales trader said.

"But that said, the gains over the past few weeks are substantial, and we could go sideways until the ECB finally announces its plan."

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