The central bank is purchasing asset-backed securities as it takes new steps to tackle the looming threat of deflation in the eurozone.

The beginning of further easing in Europe – to go alongside record low interest rates – sparked buying across markets today as investors returned to stocks sold off for much of October.

The UK’s FTSE 100 was up 1% at 6,330, while France’s CAC 40 was 2% firmer, and Germany’s DAX climbed 1.7%.

All major markets across Europe were higher, with Spain and Italy’s leading indices also up 2.1% and 2.6%.

Covered bonds are debt backed by pools of home or commercial property loans, with the majority of the global market based in Europe.

The news particularly lifted banking stocks including Commerzbank and SocGen, with most banks across Europe up over 4%.

The ECB – headed by Mario Draghi (pictured) – had already announced it would start buying asset-backed securities in the fourth quarter, as well as offering banks ultra-cheap loans, as it seeks to boost inflation from its current level of just 0.3% in September, a five-year low.