The euro regained ground, the euro zone yield curve steepened and stocks fell in Europe today after the US Federal Reserve's widely expected half a percentage point cut in interest rates.
The euro rebounded sharply against the dollar after market talk of commercial central bank orders, gaining nearly a cent to test its best levels of the week.
But long-term bond yields rose and short-term bonds yields fell as investors factored in concerns that the Fed's fifth half point cut this year would ultimately stoke inflation.
Shares reacted cautiously, with pan-European indices down 1 per cent even after the Fed said it stood ready to cut rates again due to risks of a rapidly slowing US economy.
"The market got what it was expecting," said ING Charterhouse director Mr James Dewhurst.
"The bigger issue is we're four-and-a-half months into interest rate cuts in the States and we're still getting some powerful medicine. People are going to have to start asking: what exactly are we fighting?
"If there is a silver lining, it is that the easing bias is still in place," he said.
At 8.50 a.m., the pan-European FTSE Eurotop 300 index was off 1.24 per cent, and the narrower blue-chip DJ Euro Stoxx 50 lost 1.33 per cent.
Telecom equipment stocks Alcatel and Nokia lost more than 1.7 per cent apiece, and the consumer electronics maker Philips Electronics lost 2.2 per cent.