Stocks fall as market underwhelmed by European Central Bank move

Dec 4 Euro zone sovereign bonds worth around 750 billion euros have again become eligible for purchase under the European Central Bank’s quantitative easing scheme after the bank cut its deposit rate on Thursday, data from trading platform Tradeweb shows.

“The ECB overshadowed today’s data point”, said Chris Gaffney, president of EverBank World Markets in St. Louis, in reference to the U.S.jobs data.

Following recent dovish comments from ECB President Mario Draghi, markets had expected more aggressive measures including a larger cut in the deposit rate and perhaps even an increase in the monthly pace of asset purchases. Expectations had been elevated after ECB chief Mario Draghi signaled the bank would act decisively to keep the 19 countries that use the euro from falling into deflation or an economic contraction.

Mr Draghi set the scene for more stimulus in October and reinforced his pledge in a speech two weeks ago when he said officials “will do what we must to raise inflation as quickly as possible” – an echo of his “whatever it takes” intervention in June 2012 to staunch the worst throes of the eurozone crisis.

The euro shed 0.75 percent against the dollar to trade at $1.0862 after shooting 3.1 percent higher on Thursday, its biggest one-day gain since March 2009.

“Draghi failed to deliver on investors´ expectations”, said ETX Capital analyst Daniel Sugarman.

“The non-unanimity of the decision is important, and the market’s disappointment is important for the future”, Toby Nangle at asset manager Columbia Threadneedle said.

“If the economy disappoints and the potency of central banks disappoint, it would be a cocktail that the market is not ready for”, said Didier St Georges, managing director of fund manager Carmignac. The region is facing significant headwinds from low inflation and central bankers would be wise to hold back some ammo for their arsenal in case Eurozone growth slips further.

The ECB buys mainly euro-denominated government bonds.

He said France gave up the pretence of fiscal rectitude with successive delays to cutting its deficit while Italy’s 2016 fiscal stance next year is also projected to be 0.7 percent points of GDP looser than seen six months ago.