The euro fell, European shares jumped and bond yields in Italy, Spain and Portugal fell on Thursday after European Central Bank President Mario Draghi announced a bond purchase programme of €60 billion a month.

The euro sank by a full cent against the dollar to $1.1511, still above 11-year lows of less than $1.15 hit last week. The FTSEurofirst 300 index of top European shares rallied, gaining 0.8 per cent and hitting a fresh seven-year high, while Germany’s DAX hit a record high. Italian stocks featured among the top gainers, with Unicredit up 3.6 per cent and BMPS up 2.9 per cent.

Spanish 10-year bond yields fell to the day’s low of 1.491 per cent, about 5 basis points down on the day. Italian yields fell as low as 1.639 per cent, while Portuguese yields dropped to 2.477 per cent.

All were close to record lows. German 10-year Bund yields were 5 bps higher at 0.51 percent, little changed after the announcement. “He took out the bazooka ... It is a big and credible programme,” said David Keeble, global head of interest rates at Credit Agricole in New York.

“Bond markets are caught between a rock and a hard place. The large buying will pull yields down but rising inflation expectations are pushing them up. So far, they have not resolved the reaction.” Euro zone money market rates fell.

Reuters