Draghi drags bourse down

The sell-off was triggered after the European Central Bank (ECB) president Mario Draghi failed to reassure investors at an ECB policy meeting that he was ready to act immediately to support the region's economies. His decision not to intervene directly in the European bond market sparked heavy losses across European stocks and rippled through US and Australian markets.

Mario Draghi's decision not to commit to immediate intervention left investors disappointed because it came a week after he suggested European officials would do "whatever it takes." That lack of a clear bond-buying or support program reduced confidence and contributed to sharp falls in share and bond prices.

European stocks tumbled about 3%, and US markets experienced their biggest drop in a month, with the Dow falling 92 points. The moves were driven by rising bond yields and investor concern over the ECB's stance.

Bond prices fell and yields rose sharply in countries such as Italy and Spain. The article says bond yields 'soared' in Italy and Spain after the ECB signalled it would not immediately intervene in the bond market.

Australia's local sharemarket dropped about 1.1% following the European sell-off. The benchmark S&P/ASX200 fell 48.0 points to 4,221.5, while the broader All Ordinaries index was down 47.1 points to 4,243.

The mining sector was a major drag on the Australian market, contributing to the big losses that pulled the S&P/ASX200 and All Ordinaries down by around 1.1%.

Many investors had been hoping for a concrete bond-buying programme to reduce borrowing costs in Spain and Italy. The ECB's decision not to intervene directly left markets in limbo because such a programme would have been expected to ease pressure on those countries' bond yields.

The 'watch and see' approach refers to the ECB signalling caution rather than taking immediate action. It mattered because investors were expecting a decisive bond-buying response to calm markets; without it, uncertainty rose and markets sold off, leaving investors and markets in a state of limbo.