Asian stocks join global market rout after European Central Bank shocks investors

“I’d thought that for a recovery in the European economy we’d need some bold easing measures, but since Draghi seems to be taking the economic recovery lightly, it’s possible that it could take a turn for the worse for some time”.

“If markets expected another thing, that’s their view, but I would like to invite them to look…at the links between what we are doing and what is happening in financial markets and the real economy and to have confidence that these links will be reinforced by the measures taken yesterday”, Jan Smets said.

Sandvik fell 3.1 percent after JP Morgan cut its rating on the engineering company to “underweight” from “neutral” and lowered its target price for the stock.

The ECB has been buying about 60 billion euros ($65 billion) of assets a month, mostly government bonds, since April. Paris and Frankfurt plunged 3.6 percent each and London lost more than two percent, while Wall Street’s three main indexes shed between 1.4 and 1.7 percent.

“But ECB’s recent decision definitely fell short of the market’s expectations and this was reflected in the domestic stock market”. Earlier the European Central Bank announced that the main interest rates would remain unchanged at 0.05% for main refinancing operations, and 0.3% on the marginal lending facility.

The ECB’s decision to further ease monetary policy is “absolutely unnecessary and harmful”, Georg Fahrenschon, president of Germany’s DSGV savings-banks association, said in an e-mail.

A strong jobs figure would bolster the case for the Federal Reserve interest-rate increase later this month.

But the euro hit a four-week high of $1.0894, over 2% up on the day, and the pan-European FTSEurofirst 300 fell deeper into negative territory in a sign financial markets had been expecting Draghi to provide more stimulus. The euro rose nearly 3 percent against the dollar.

Hence, a policy divergence between the ECB and the Fed emerges, with the European Central bank keeping up with the status quo and its American counterpart moving towards a tighter monetary policy amid an improving job market. “Nothing so… catastrophic had happened in the break (between October’s and December’s governing council meetings) that the European Central Bank should come with a massive market-surprising package at the end of the year”, Rimsevics said. Fed Chair Janet Yellen said on Wednesday she was “looking forward” to a United States interest rate rise but an unexpectedly weak manufacturing survey this week has also raised fresh doubts about the Fed’s rate path.