The FTSE 100 was flat in early trading on Thursday with markets cautious ahead of policy decisions in both the UK and Europe due after midday.
The Bank of England's (BoE's) Monetary Policy Committee (MPC) is predicted to keep the Bank Rate at 0.5% but ramp up its asset purchase programme by £50bn to £375bn. "Financial markets have become increasingly convinced that another slug of QE is on its way, and the MPC has done nothing to dissuade investors from this view," according to analysts at Barclays Capital.
Meanwhile, the European Central Bank (ECB) is widely expected to cut the refinancing rate from the current level of 1.0%. Gerhard Schwarz, head of Equity Strategy at Baader Bank, said: "The most likely outcome in our view is a 25 basis point cut. A bigger cut would increase pressure on the ECB to move towards 'unconventional' stimulus - something the ECB has been very reluctant to do recently. So with the refi rate standing at 0.75% the ECB could still argue to have some firepower left."
FTSE 100: GKN surges early on
Global engineering firm GKN jumped over 12% after saying it had agreed to buy Volvo's aero engine division and would turn to institutional investors to raise money to help pay for it. Arden Partners upgraded its rating on the stock this morning to 'buy'.
GKN plans to pay AB Volvo around £633m for Volvo Aero, which designs, engineers and manufactures components for aircraft engine turbines. To help fund the deal GKN aims to place £140m of new shares with institutional investors, with the rest of the money coming from new debt facilities.
Shareholders of Xstrata were clearly pleased with the group's decision to adjourn its extraordinary general meeting until a later date, with the stock rising early on. Shareholders were due to vote on the the Xstrata-Glencore merger on July 4th.
Utilitiy giant Centrica fell after Goldman Sachs downgraded the stock to 'neutral' and cut its target price from 441p to 422p.
Banks were out of favour early on with Royal Bank of Scotland, Lloyds and Standard Chartered among the worst performers. Barclays edged higher this morning following the sharp falls seen over the past week. Over the last seven days, the stock has dropped over 14% on the back of the LIBOR scandal.
FTSE 250: Dunlem sees strong Q4 sales
Homewares retailer Dunelm advanced after saying that total revenue increased 21.2% in the fourth quarter of the group's fiscal year, boosted by the unusually wet weather. However, the group cautioned that it expects consumer spending to remain under pressure.
Ahead of its annual general meeting today, Great Portland Estates has revealed its net asset value per share and portfolio valuation are on the up, causing shares to rise.
Markets across Europe dropped sharply in early trading on Thursday after Federal Reserve Chairman Ben Bernanke last night signalled that the central bank could soon start to scale back its quantitative easing (QE) programme. [1 Hour Ago]
The Prudential Regulation Authority (PRA) said that five of the major eight banks in the UK fell short of their capital requirements at the end of 2012 with a combined shortfall of 27.1bn pounds. [1 Hour Ago]
Chancellor George Osborne has signalled the prospect of the first stages of the privatisation of Lloyds Banking Group, The Telegraph reported. He hinted the sale of the state-backed lender's shares within months, saying the bank was in a good position for selling down the taxpayer's 39% internet. However, he warned that he would urgently look into a break-up of tax-payer backed Royal Bank of Scotland into a "good bank and bad bank". [3 Hours Ago]
After a subdued start, the FTSE 100 finished with impressive gains on Tuesday as investors put aside worries ahead of the key 'risk event' of the week, the monetary policy meeting at the Federal Reserve. [Tue 17:04]
Whitbread was performing well on Tuesday after the company reported a decent first quarter with group sales up 13.8 per cent, boosted by growth at Premier Inn and another strong performance from Costa which saw sales jump by an impressive 24.8 per cent. [Tue 14:34]
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