Stocks fall further on European Central Bank letdown

These concerns are amplified by broad recognition that, in the absence of additional measures by governments, the beneficial impact of European Central Bank actions on the economy is likely to be limited. Following the ECB’s decision to hold off raising bond purchases, “the severe market reaction underlines that in the “new normal”, no good deed goes unpunished”.

“The cut in the ECB’s deposit rate from -0.2% to -0.3% comes as a bit of a relief after incorrect last minute reports (by some media) that it had left rates unchanged”, said Jonathan Loynes, chief European economist at Capital Economics. In addition, the SPDR S&P 500 ETF (SPY) fell 1.4%, and the Energy Select Sector SPDR ETF (XLE) fell 2% on December 3, 2015.

But investors were disappointed by the changes, which included taking interest rates even deeper into negative territory and extending the timeframe of its €60bn (£43.2bn) a month bond buying programme.

Global bond yields shot up, with the US 10-year yield US10YT=RR rising to as high as 2.347 percent from 2.178 percent overnight. Investors increasingly expect the US central bank to raise rates from a record low at the meeting.

In Friday afternoon deals, London lost another 0.7 percent, Frankfurt fell 1.1 percent and Paris shed 0.7 percent, one day after the key indices shed between two and four percent in value.

European Central Bank President Mario Draghi has announced a cut in interest rates and an extension to the ECB’s massive asset-purchasing plan to 2017. The Britain’s FTSE 100 outperformed having lost 2.3% yesterday. 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.

The DAX Index and the CAC 40 Index plunged by 3.6 percent each.

Only a day after the European Central Bank’s latest move to easy policy, discord between euro zone rate setters over the decision is becoming apparent, suggesting any further step to stimulate inflation may face a higher hurdle.

“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.

“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.