LONDON (Alliance News) - UK stocks ended mixed Thursday after an initial boost provided by doveish comments from European Central Bank President Mario Draghi quickly faded, leaving European markets to outperform London.
Instead, it was a busy day of corporate reporting that drove the most significant stock movers on the London Stock Exchange.
The FTSE 100 ended the day up 0.2% at 6,551.15, while the FTSE 250 closed down 0.1% at 15,515.13, and the AIM All-Share outperformed to close 0.8% higher at 721.75.
Major European markets performed better, with the French CAC 40 ending up 0.5%, and the German DAX up 0.7%. US markets were holding onto slim gains at the London close, with the DJIA up 0.2%, the S&P 500 up 0.1%, and the Nasdaq Composite fractionally higher.
The ECB Thursday voted to keep all of its key interest rates unchanged, as expected. While that decision had little effect on markets, Draghi provided a boost for stocks and simultaneously hurt the euro with his comments at the press conference that followed.
Draghi said that the new asset-backed security purchase program will last for at least two years and will seek to grow the size of the central bank's balance sheet back towards its 2012 level. This will mean the ECB expanding its balance sheet to EUR3 trillion, from the just above EUR2 trillion it stands at now. Draghi said that the governing council was unanimous in this decision, and moreover that it is unanimous in standing ready to use additional unconventional stimulus measures if necessary.
Markets sold off a little earlier in the week after Reuters reported that a rift had opened up between European central bankers over Draghi's communication style. The confirmation Thursday that the policy makers are unanimous in their decisions was therefore welcomed by investors, although by the time of the equity market close, UK stocks had given up much of the initial gains.
"President Draghi’s press conference was a demonstration of unity and readiness to act at the ECB," said Berenberg senior economist Christian Schulz.
The Bank of England also concluded its policy meeting Thursday and kept the UK base interest rate on hold at 0.5%, while also maintaining its stock of GBP375 billion in assets, as expected.
Taking into account the new ECB target and the extra stimulus recently announced by the Bank of Japan, Shore Capital calculates that the total G4 central bank balance sheet size is set to rise by 20% by the end of next year, which it says should continue to boost asset prices even though the Federal Reserve has now ended its own stimulus program.
The euro fell by a whole cent against the dollar to a two year low of USD1.2395 in the wake of Draghi's comments. The pound also lost ground against the dollar over the session, quoted at USD1.59 at the time of the equity market close.
UK economic data earlier in the day showed growth in industrial production fell to 1.5% in September from 2.2% in August, while manufacturing production growth fell to 2.9% from 4.0% in the same period.
On a busy day of corporate reporting, the supermarkets led London market gainers Thursday after Morrisons said it was making progress in its three-year turnaround plan, cutting prices long-term and focusing less on promotions. It narrowed its full-year pretax profit guidance range to between GBP335 million and GBP365 million, from between GBP325 million and GBP375 million previously, although that's still around half its profit of GBP785 million in the year to February 2, 2014.
Investors welcomed the progress and Morrisons closed up 5.9%, while Sainsbury's and Tesco also received a boost, gaining 5.9% and 3.4%, respectively.
Experian was also a big winner, closing up 6.3% after the credit checking company reported a rise in first-half pretax profit to USD534 million pretax profit in the six months ended September 30, compared with USD480 million in the corresponding period last year. The group increased its first interim dividend by 7% to 12.25 US cents per share, citing strong cash performance.
RSA Insurance was the heaviest faller in the FTSE 100, dropping 4.6% after reporting a fall in premiums as a result of weak insurance market conditions and the group's restructuring plan being led by Chief Executive Stephen Hester. RSA said net written premiums fell to GBP5.68 billion in the first nine months of the year, compared with GBP6.74 billion in the corresponding period last year.
FTSE 250-listed Spire Healthcare gained 4.8% after the independent hospital group said it was trading in line with expectations, and announced that it had agreed a contract renewal with healthcare provide Bupa UK for a minimum term of four years.
DS Smith shares closed up 4.1% after the company said its first half was in line with expectations, with strong growth in all regions, and said it has struck a deal to buy Spanish corrugated board producer Andopack for GBP35 million.
Debenhams closed up 3.6% after Sports Direct International said it has increased its interest in the department store to 12.7%, after selling its remaining 4.6% direct equity stake and replacing it with a put option for a 6.1% stake, following a similar deal for a 6.6% interest made in January.
Cable & Wireless Communications fell 7.4% after it announced a placing of new shares representing up to 9.99% of its existing share capital to help fund the acquisition of Barbados-based telecommunications company Columbus International Inc for USD1.85 billion, while posting a rise in pre-tax profit for the half year to end-September. The company will fund the acquisition via the payment of USD707.5 million in cash and issue of 1.56 billion new shares in the company to some Columbus shareholders.
Halfords Group closed down 3.3% after the bike and car parts retailer reported a fall in profit margins in both businesses, with its autocentres hit as it sold a bigger proportion of low-margin tyres, and its retail business hurt by strong sales of lower-margin premium bikes. The group did report a rise in pretax profit to GBP49.4 million for the 26 weeks to September 26, up from GBP44.6 million a year earlier.
On Friday, National Grid releases interim results, while third quarter numbers are due from Essar Energy, Croda International, Rentokil Initial, and Admiral Group, with an interim management statement expected from Bovis Homes.
In the economic calendar Friday, the main event will be the release of the October US non-farm payroll employment report at 1330 GMT. Ahead of that, German industrial production data and UK trade balance data are out in the morning.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
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13 May 2016 16:04
