European stocks closed higher Tuesday as the Federal Reserve cut interest rates in an effort to stem slower economic growth on the back of the coronavirus outbreak.
The pan-European Stoxx 600 index closed more than 1% higher provisionally, having earlier traded up 3% following the U.S. central bank's decision. Most sectors ended higher, although banks bucked the trend to fall over 1%.
Markets had widely expected the Fed to make the 50-basis point cut at its next Federal Open Market Committee meeting later this month. The emergency slashing of rates came shortly after the G-7 announced it would commit unspecified tools to help the global economy deal with the threat.
On Wall Street, markets initially turned higher on the news from the Fed before falling back into negative territory. The Dow Jones Industrial Average fell about 400 points, while the S&P 500 and Nasdaq indexes were also negative.
New cases of the virus continue to decline in China, where the outbreak of the flu-like illness began. But cases are rising elsewhere with South Korea, Iran and Italy the worst hit countries outside China.
Meanwhile, inflation in the euro zone slipped in February, compared with the previous month, meeting analyst expectations. Consumer prices were up 1.2% in February year-on-year, following a 1.4% rise in January, the data from Eurostat, the bloc's official statistics office, showed. This was due primarily to a 0.3% fall in energy prices.
At the other end of the European benchmark, Hiscox dropped over 5% after UBS cut its price target, while Italian lender Banco BPM slipped 8% as investors reacted negatively to its new business plan unveiled on Tuesday.