Morrisons among strugglers as market left unimpressed by European Central Bank measures

The region’s equities had plunged on Thursday as the European Central Bank’s latest stimulus plan disappointed investors, sparking a global selloff that spilled over into Wall Street and Asia.

Craigs Investment Partners broker Chris Timms said the sell-off came as ECB president Mario Draghi announced the bank would extend its programme of monthly bond purchases through to March 2017 and left the door open for an extension.

More bad news on lingering low inflation in the eurozone intensified expectations that Mario Draghi, the European Central Bank president, will expand the single currency bloc’s €1.1trn (€776bn) stimulus programme today.

The decision is “disappointing” because bond purchases by the European Central Bank will mean insurers have to buy riskier assets to make a return, Immo Querner, chief financial officer at Talanx AG, Germany’s third-biggest insurer, said in an e-mail.

And it expanded its purchases of bonds to include debt issued by regional and local governments.

The firm, which focuses on luxury developments in London and the south east, posted pre-tax profit down 3.8% to £293.3 million in the first six months of its year, but pledged to boost its dividends by a quarter over the next six years.

“The failure to meet the expectations for further policy loosening fuelled by its own dovish signals has dented both (the ECB’s) reputation for communication and, more importantly, the outlook for the eurozone economy”, said Jonathan Loynes at Capital Economics. Some analysts had also predicted that the bank will introduce a two-tier deposit rate to support the negative deposit rate. “The marked squeeze higher on Draghi’s underwhelming easing suggested that the market was not paring back short positions into the meeting, but adding to them”. “We’ve argued that the monetary policy backdrop in Europe has been part of the problem”, they add, with low base rates covering the credit market under a blanket of low-yield permafrost. “We are doing more because it works, not because it fails”, he said. Worryingly for Mr Draghi, longer-term inflation expectations – closely watched by the bank – remain at around 1.75 per cent, increasing the risks of entrenched deflation.

Federal Reserve Chair Janet Yellen, speaking on Thursday, said the United States may be “close to the point at which we should be raising” rates.