LONDON (Alliance News) - London markets are set to open positively Friday, building on six sessions of gains as investors welcome the European Central Bank's confirmation of its long-anticipated intention to add sovereign bond buying to its stimulus measures.
The FTSE 100 is called to open 39 points higher at 6,836.7, up from a 1% gain Thursday.
ECB President Mario Draghi said the bank will start buying sovereign debt in March at a rate of EUR60 billion a day through September 2016 in a bid to boost the moribund European economy, a figure higher than expected. However, the bank also said it will continue until there is a "sustained adjustment in the path of inflation which is consistent with" the ECB's aim of achieving inflation rates below, but close to, 2% over the medium term, making the process effectively open-ended. The ECB's main interest rate was left unchanged at a record low of 0.05%.
The news lifted stocks, but weighed on the euro. The euro is quoted at USD1.1340 early Friday, down from USD1.1620 before Thursday's announcement. The CAC-40 ended 1.5% higher and Germany's DAX closed up 1.3%. In New York, the DJIA and S&P 500 both added 1.5%.
"Having promised to do whatever it takes in 2012, the ECB has finally had to put its money where its mouth is, despite bond yields already being at record lows," says Michael Hewson at CMC. "The key question now is whether it will be enough."
"While the program has had the inevitable effect of pushing stock markets sharply higher and the euro off a cliff, it remains doubtful that this extra cash will make that much difference," Hewson adds. "Quite simply, the banking transmission mechanism in the euro area continues to remain impaired, and until that is fixed a lot of this cash is unlikely to trickle down to where it is needed."
In Asia, markets responded positively Friday. Japan's Nikkei closed up 1.1% at 17,511.75. The Hang Seng in Hong Kong is up 1.2% at 24,811.43, and the Shanghai Composite is 0.3% higher at 3,351.764, weighed down by by HSBC manufacturing survey which indicated another contraction in Chinese producer prices in December. The HSBC Manufacturing Purchasing Mangers' Index was 49.8 for January, up from 49.6 in December but still in contraction.
French, German and euro zone services and manufacturing PMIs are due at 0800 GMT, 0830 GMT and 0900 GMT respectively. UK retail sales for December are due at 0930 GMT, and US Markit manufacturing PMIs are due at 1445 GMT.
Brent crude is quoted at around USD49.35 a barrel early Friday, up from last week's low of USD45.16, and US benchmark West Texas Intermediate is quoted at USD46.74 a barrel. Prices rose in Asian trading on the news of the death of King Abdullah of Saudi Arabia, the largest oil producer in the Organization of Petroleum Exporting Countries.
"The announcement overnight of the death of the Saudi king has invited speculation about the possibility of a change in the current Saudi policy of allowing oil prices to fall to reach their natural level, with a sharp rally higher, but any change in policy seems unlikely," CMC's Hewson says.
Gold is hovering around the psychologically important USD1,300 level passed Wednesday for the first time since last summer. Early Friday it is quoted at USD1,295.81 an ounce.
In UK corporate news, shoe and accessories maker Jimmy Choo reported full-year revenue of GBP299.1 million, up 6.2%, and said Asia continues to be strong.
Close Brothers recorded a slight rise in assets under management in the five months to December 31, reaching GBP9.9 billion at year end from GBP9.7 billion on July 31, and said it remains confident in the outlook for the current financial year.
Premier Foods said it expects full-year adjusted profit to be GBP77.1 million and trading profit in line with expectations at GBP131 million after an improvement of sales in December.
US earnings Friday include Bank of New York-Mellon, General Electric and Honeywell, all scheduled to be released before US markets open.
By Ian Edmondson; ianedmondson@alliancenews.com
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