EUROPE MARKETS: Europe Stocks Rise As ECB Ramps Up Low-inflation Battle

By Carla Mozee, MarketWatch

LONDON (MarketWatch) -- European stocks climbed, but the euro sank to a more than one-year low Thursday after the European Central Bank cut interest rates and unveiled a bond-buying plan as it battles low inflation in the eurozone.

ECB decision: Policy makers at the central bank cut three key interest rates by 0.1% percentage point each. The refinancing rate was lowered to 0.05%, the marginal lending rate to 0.3% and the rate on the deposit facility to negative 0.2%. ECB President Mario Draghi at his press conference then announced plans to begin purchasing a broad portfolio of euro-denominated covered bonds as well as asset-backed securities. Follow MarketWatch's live blog of Draghi's press conference.

The ECB also cut its 2014 inflation forecast to 0.6% from a previous estimate of 0.7%.

Market reaction: The euro (EURUSD) dropped fell more than a penny against the U.S. dollar, trading below $1.31 for the first time since July 2013, according to FactSet data. The shared currency bought $1.3002 compared with $1.3132 on Wednesday.

"Draghi caught the markets sleeping today," with the rate cuts and "the euro was beaten down against all major peers," said Farhan Ahmad, a trader at TradeNext, in a note.

The Stoxx Europe 600 rose 0.8% to 347.55, touching intraday highs after the ECB announcements. The benchmark had turned higher before the ECB announcement following a Reuters report that the central bank was considering a plan to buy asset-backed securities worth up to 500 billion euros ($637 billion).

Among movers on the Stoxx Europe 600, Standard Life headed advancers, surging 6.1% on the insurer's plan to return 1.75 billion pounds ($2.88 billion) to investors as the company agreed to sell its Canadian assets to Manulife Financial .

Bilfinger SE shares were the index's worst performer, sliding 9.8% after the German construction and services company issued a warning on profit for the third time in three months.

Among national markets, Germany's DAX 30 index turned higher by 0.3% to 9,651.66, and France's CAC 40 rose 1.3% to 4,478. The U.K.'s FTSE 100 picked up 0.1% to 6,883. The Bank of England on Thursday held its key interest rate at 0.5%, as expected.

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