Once again seeking to calm market tension after efforts by euro zone governments failed, the European Central Bank on Thursday unexpectedly intervened in bond markets in an attempt to prevent the region’s sovereign debt crisis from engulfing Italy.
The show of force initially bolstered Italian and Spanish bonds. But the move appeared to backfire as stock markets in Europe and the United States fell sharply after Jean-Claude Trichet, the central bank’s president, warned of dangers ahead. The modest scale of the bank’s bond buying apparently fell short of what investors considered adequate.
The market downturn began in Europe but quickly spread to the United States as soon as trading opened Thursday morning on intensifying investor fears about a slowdown in global economic growth and worries about Europe’s debt crisis, which is centered now on Italy and Spain.
In another response to the escalating crisis, the E.C.B. moved to prop up weaker banks that may be having trouble raising funds, expanding its lending to euro zone institutions at the benchmark interest rate. The central bank left that rate unchanged at 1.5 percent, while the Bank of England left its benchmark rate at a record low of 0.5 percent.
Mr. Trichet declined to say what bonds the bank was buying or how much. He said the bank acted in response to “renewed tensions in some financial markets in the euro area.” It was the first such intervention since March.