ECB fails to prevent Black Monday for bourses

The decision by the European Central Bank (ECB) to purchase Spanish and Italian debt had little effect in stopping Spain's stock market from registering a new annual low on Monday.

The Spanish bourse, as well as the rest of the global markets, was dragged down by the surprise downgrade last Friday of the United States' sovereign debt by the rating agency Standard & Poor's.

But the ECB's announcement on Sunday that it would "actively purchase" Spanish and Italian bonds helped bring down Spain's risk premium by a fall not seen since the creation of the euro.

After fours days of record peaks above 400 basis points from the benchmark German bund last week, Spain's risk premium dropped from 370 basis points at the close on Friday to 289.4 on Monday.

The market took the biggest hit at the end of the day after gaining more than four percent during early trading. The Spanish blue chip Ibex-35 dropped 2.44 percent, closing at a new annual low of 8,459.40 points- a level not seen since April 2009.

"We have been dragged down by the United States, despite the Ibex gaining four percent on the news that the ECB was going to buy Spanish and Italian bonds" said Soledad Pellón, an IG Markets analyst. "But once this news was taken for granted, Madrid and Milan allowed themselves to be swept away by the rest of the markets."

Standard & Poor's downgraded the United States' debt from AAA to AA+ on Friday, renewing fears that the world's biggest economic power is heading toward recession.