Euro set for biggest gain since March as ECB delivers less than expected

LONDON, Dec 3 (Reuters) - The euro was on track for its biggest daily gain since mid-March on Thursday as a series of stimulus measures announced by the European Central Bank failed to live up to market expectations.

The ECB extended its asset-purchase programme, known as quantitative easing, by six months to March 2017, but did not beef up monthly purchases as many investors had hoped.

It (Other OTC: ITGL - news) also agreed to buy euro-denominated municipal and regional bonds and cut its deposit rates by 10 basis points to -0.30 percent, although this was slightly less than money markets had priced in.

The single currency hit a four-week high of $1.0894 after the announcement, up over 2 percent on the day, while euro zone stocks shed 2 percent as they headed for their biggest daily drop since September.

Ten-year euro zone government bond yields rose 10-20 basis points, with Italy's near a one-month high after a 28 bps rise to 1.66 percent. Money market rates rose.

"The markets were very ambitious with respect to the measures the ECB would possibly take and are now disappointed," said Stephan Rieke, senior economist at German private bank BHF-Bank. (Writing by John Geddie; Reporting by London markets team, editing by Nigel Stephenson)