The European Central Bank (ECB) has cut its key interest rate for the second consecutive month.

The ECB slashed the benchmark rate Thursday by a quarter of a percentage point to one percent.

However, expectations in financial markets that the bank would ramp up its purchases of European government bonds were dashed when its president, Mario Draghi, announced the bank would not make such purchases. Such expectations had initially emerged based on remarks Draghi made last week.

Stock prices in Europe had started strong on Thursday but plunged following the news. German and French stocks dipped more than two percent while the Dow Jones Industrial Average at the New York Stock Exchange fell more than one percent.

Skeptical prospects over a summit of European leaders slated on Friday also led to contraction of investment sentiment.