European shares inch lower ahead of ECB meeting, carmakers drag

(Reuters) – A European stock market rally paused on Thursday, with investors focussing on a European Central Bank meeting where policymakers are expected to provide more aid for the battered euro zone economy.

The pan-European STOXX 600 index <.STOXX> slipped 0.5% by 0708 GMT, but held near its early March highs, while eurozone stocks <.STOXXE> were down 0.6%.

Automakers <.SXAP> and banks <.SX7P> led the declines, falling 2.5% and 1.8%, respectively.

Equity markets have bounced strongly this week, with Wall Street’s tech-heavy Nasdaq <.IXIC> nearing record levels as signs of recovery from a coronavirus-forced recession, optimism over a COVID-19 vaccine and hopes of more stimulus boosted risk appetite.

Investors expect the ECB to upsize bond purchases by 500 billion euros ($560.25 billion), but the only question is whether it will act on Thursday or hold out until July as a deal on European Union-wide fiscal support strengthens the case for patience.

Meanwhile, Germany’s coalition parties agreed a 130-billion-euros stimulus package to speed up a recovery from the coronavirus on Wednesday, but shares in Daimler , BMW and Volkswagen slid between 2.6% and 4.5% as the packaged favoured electric cars.

French spirits company Remy Cointreau jumped 6.9% after it predicted a strong recovery in the second half, driven by China and the United States.

($1 = 0.8925 euros)

(Reporting by Sruthi Shankar in Bengaluru; Editing by Arun Koyyur)