Europe open: Shine comes off China rally as Stoxx slips

European shares opened lower on Thursday as the rally from China’s stimulus measures ran out of steam, even after the country's central bank released more funds for financial institutions.

The pan-regional Stoxx 600 index was down 0.22% at 518 in early deals with major markets in the red. Markets had bounced on the package of rate cuts from the People's Bank of China aimed at boosting the country’s flagging economy.

Overnight the bank slashed its medium-term lending facility from 2.3% to 2.0%, marking the largest reduction of interest rates for one-year loans to financial institutions in history.

Just one day after unveiling a list of measures designed to stimulate demand and put the economic recovery back on track, the PBoC said it was also lending 300bn yuan ($43bn) to financial institutions.

The move, which was widely expected following comments from PBoC governor Pan Gongsheng the previous day, follows a raft of cuts to reserve requirements and lending rates, including for existing home loans.

"The problem is, the stimulus measures will take time to show in the economic data," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

"And more worryingly, they won’t do much to fix the country’s deepest issues – they won’t reverse local governments’ heavy debt burden, China’s aging population, and will hardly boost the demand-led growth."

In equity news, paper industry technology maker Valmet led the gainers with a 9% rise.

Reporting by Frank Prenesti for Sharecast.com