By Atul Prakash and Kit Rees
LONDON (Reuters) - The FTSE dropped sharply to a one-week low on Thursday after some new measures announced by European Central Bank President Mario Draghi to support the region's economy fell short of analysts' expectations.
The blue-chip FTSE 100 index (FTSE) ended 2.3 percent weaker at 6,275.00 points, the lowest level since late November. However, the index outperformed the European market, which was down about 3 percent, as Britain is not a member of the euro zone and many firms in the UK index have an international exposure and are less affected by European policies.
The ECB cut a key rate and extended its monthly asset purchases. The ECB had been expected to have discussed more extreme ideas, possibly a two-tier deposit rate that would punish banks parking too much cash with the central bank, or the purchase of municipal and corporate debt.
"Although a rate cut was delivered, it was marginally smaller than the market had anticipated. Furthermore, the extension of QE by six months with no increase in the pace of purchases also disappointed," Toby Nangle, global co-head of multi asset at asset manager Columbia Threadneedle, said.
"What we are left with is a ‘hawkish ease' from the ECB, ahead of what is commonly expected to be a ‘dovish hike' by the U.S. Federal Reserve later this month."
Shares in Sports Direct (L:SPD) fell 5.4 percent, the biggest loss in the FTSE 100, after Goldman Sachs (N:GS) cut its target price for the stock by nearly 12 percent to 850 pence.
Mining stocks also fell, tracking weaker metals prices. The FTSE 350 Mining index (FTNMX1770) was down 3 percent, while Anglo American (L:AAL), BHP Billiton (L:BLT), Antofagasta (L:ANTO) and Rio Tinto (L:RIO) fell 2.6 to 3.4 percent.
"I think (the sector) remains clearly under pressure ... They're seeing their earnings tumbling away and they can't sustain dividends at current levels if their earnings are likely to remain down for any length of time," said Ian Forrest, an investment research analyst at The Share Centre.
Whitbread (L:WTB), Britain's biggest hotel and coffee shop operator, was among a few gainers and ended 0.3 percent higher following a target price upgrade by Credit Suisse (VX:CSGN), which added the stock to its global and European focus lists.
Credit Suisse saw value in the company's shares even though they were at a 13 percent premium to the UK market.