June 5, 2014 / 2:07 PM / 5 years ago

European shares rally on ECB, DAX hits all-time high

* Euro STOXX up 1.1 pct after setting 6-yr high

* Germany’s Dax at all-time peak

* Banks, southern bourses lead rally

By Francesco Canepa

LONDON, June 5 (Reuters) - Euro zone shares rallied on Thursday, led by banks and peripheral indexes, as the European Central Bank unveiled a string of measures to fight low inflation and boost the euro zone economy.

The announcement lifted the German blue-chip DAX index to an all-time high of 10,013.69, before it ticked back down to 9,967.01, an overall increase of 0.4 percent on the day.

The euro zone Euro STOXX index rose 1.1 percent, setting a six-year high at 333.80, with the blue-chip Europe STOXX50 up 1.2 percent.

The ECB cut rates, effectively charging banks to deposit cash at the central bank, and outlined a four-year 400 billion euro ($544.86 billion) scheme aimed at stimulating credit at a time when banks face tough scrutiny of their asset quality.

“This is very positive for equities because implicit in the announcement is that rates are going to be low for a very long time,” said Manish Singh, director and head of investment services at Crossbridge Capital.

“One also has to feel positive because Draghi will likely follow this up with more announcements at the next meeting.”

Euro zone banks, which depend on the health of their domestic economy for their earnings and are facing stress tests by the ECB, surged 2 percent.

Italian and Spanish stocks led risers as investors expected the ECB’s measures to bring relief to two economies struggling with low inflation and lending growth.

Italian domestic lender Banco Popolare and Spanish peer Banco de Sabadell rose 2.8 percent and 4.5 percent, respectively, to feature among top gainers on the euro zone Euro STOXX index.

The ECB measures, aimed at bringing down borrowing costs where they are still elevated and stimulating lending, also benefited companies struggling with high debt piles and meagre profits, such as French car maker Peugeot, up 3.3 percent.

The price of insuring against future swings in the euro zone blue chips, as measured by the Euro STOXX volatility index , fell 11 percent to a six-month low.

Europe bourses in 2014: link.reuters.com/pap87v

Asset performance in 2014: link.reuters.com/gap87v

Today’s European research round-up

Reporting by Francesco Canepa; Editing by Mark Heinrich

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