Stocks slip after ECB reins in bond-buying hopes

Bank shares led stock markets lower Thursday after the president of the European Central Bank reined in hopes that it would take a bigger role in dealing with the debt crisis that has crippled the 17-country Eurozone.

Mario Draghi suggested he had no intention of increasing bond purchases after the bank delivered on market expectations to reduce its main interest rate by a quarter percentage point to 1 per cent.

Draghi said he was surprised by some interpretations of his comments last week that "additional steps" would be taken if the 17 countries that use the euro agreed to closer budget controls. Germany and France have proposed a plan on closer fiscal unity that will dominate debate at the EU summit of leaders, which starts later Thursday.

"If the ECB remains unwilling to play a larger role in helping the region through this crisis, it might be difficult for markets to believe a solution is possible," said Benjamin Reitzes, an analyst at BMO Capital Markets. "This is yet another set of minimalist moves when bold action is required."

Stocks have rallied over the past week on hopes that if European governments can agree to tighter spending oversight, the ECB would step up its support for the bond markets. It currently buys bonds in the markets, but only reluctantly and in small quantities. Following Draghi's comments, stocks turned negative, with bank shares particularly badly hit.