The FTSE 100 yesterday slumped to its lowest level since last December on the back of investor disappointment with the European Central Bank’s latest stimulus measures.
The blue-chip index ended down by 1.7 per cent, or 111.13 points, at 6,446.39 points – its lowest closing level since ending at 6,439.96 points in December 2013, and marking one of its worst daily sessions in 2014.
Investors in Britain and Europe were not impressed when ECB president Mario Draghi said the bank would begin to buy covered bonds, a form of secured debt, from banks in mid-October and purchase asset-backed securities (ABS) – bundled loans – at some point this quarter.
However, he declined to specify an overall amount for the ABS-buying programme, and traders were dismayed that Draghi gave no further hints about extra measures such as quantitative easing (QE).
European shares fell sharply after Draghi’s statement, with Italy's FTSE MIB share index recording its biggest daily percentage drop in 19 months, falling 3.9 per cent to 19,894.88 points. The pan-European FTSEurofirst 300 index closed 2.4 per cent lower at 1,335.11 points.
“Investors had hoped for more than they got. The fact is that the Eurozone is in a liquidity trap in which additional monetary policy measures just aren’t working,” said Jeremy Batstone-Carr, head of private client research at Charles Stanley.