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LONDON (Alliance News) - Stocks across Europe rallied Thursday, cheered by a doveish press conference by European Central Bank President Mario Draghi in which he said the central bank stands ready to act again to spur growth and inflationary pressures in the eurozone.

The ECB maintained it has "a willingness" to act using all the tools at its disposal to meet its annual inflation target of just below 2%, including adjusting "the size, composition and duration" of its EUR1.1 trillion monetary stimulus programme, Draghi told a press conference after the ECB maintained all of its key interest rates unchanged.

The bank kept its main refinancing operations rate at 0.05% and the interest rates on the marginal lending facility and the deposit facility unchanged at 0.30% and -0.20%, respectively.

Weak inflationary pressures, along with renewed economic and market tensions triggered by the slowdown in China, have increased the pressure on the ECB to consider launching more action to head off the threat of deflation.

Draghi responded by saying the ECB was revising down its 2015 inflation forecast to near zero, warning that consumer prices could fall back into negative territory because of slumping oil prices.

The Frankfurt-based central bank also trimmed its euro-area growth projection for the year to 1.4% from 1.5% previously, as demand from the world's leading emerging economies, notably China, contracts.

"More recently, renewed downside risks have emerged to the outlook for growth and inflation," Draghi said.

"However, owing to sharp fluctuations in financial and commodity markets, the Governing Council judged it premature to conclude on whether these developments could have a lasting impact on the outlook for prices and on the achievement of a sustainable path of inflation towards our medium-term aim, or whether they should be considered to be mainly transitory," Draghi added.

Furthermore, the ECB chief said the bank's EUR1.1 trillion asset purchase plan was proceeding smoothly and that it will be fully implemented. The plan, which is implemented via monthly purchases of EUR60 billion, was having favourable impact on the cost and availability of credit for firms and households, he asserted.

"They are intended to run until the end of September 2016, or beyond, if necessary, and, in any case, until we see a sustained adjustment in the path of inflation that is consistent with our aim of achieving inflation rates below, but close to, 2% over the medium term," Draghi said.

Another key takeaway from the press conference, was the central bank raising the issue share limit from the initial limit of 25% to 33%, subject to a case-by-case verification. This allows the ECB to buy a larger proportion of any single bond issue.

"In brief, the ECB has shown markets the safety net. If required, the ECB could scale up its monetary stimulus. Possibly as a technical preparation for being able to act fast and decisively, the ECB raised the limit as to the share of any bond it may buy from 25% to 33%, subject to a few safeguards," said Holger Schmieding, chief economist at Berenberg.

Jasper Lawler, market analyst at CMC Markets, said that the key emphasis in the press statement was the ECB’s flexibility in being able to alter the size, composition and duration of its quantitative easing program.

"The limit has been raised to 33% of any one issue, up from 25%. So even though the size and duration of purchases are unchanged, markets heralded the positive effect the increase in issue limits will have on the ability of the ECB to implement the QE program fully," Lawler added.

The euro dived against other major currencies as Draghi was speaking. During London trading hours, the euro fell to a low of USD1.10860 against the dollar, while the pound hit a high of EUR1.3741.

In London, the FTSE 100 index closed up 1.8% at 6,194.10, the FTSE 250 ended up 1.2% at 17,087.24 and the AIM ALl-Share ended up 0.6% at 734.74.

European stocks outperformed, with the CAC 40 index in Paris closing up 2.2% and the DAX 30 in Frankfurt ending up 2.7%.

Wall Street similarly was higher at the London close, with the Dow 30 up 0.9%, the S&P 500 up 1.0% and the Nasdaq Composite up 0.7%.

The stock moves in New York come after the Institute for Supply Management released a report showing that the US service sector continued to expand at a significant rate in August. The non-manufacturing index edged down to 59.0 in August from 60.3 in July, although a reading above 50 indicates continued growth in the service sector. Economists had expected the index to dip to 58.5.

Investors now are looking ahead to Friday's US non-farm payrolls report, which is seen as an important indicator of whether the US Federal Reserve will raise interest rates in its September meeting.

On the London Stock Exchange, mining stocks, which have been the main casualty of the recent fall in UK equities, posted strong gains. Glencore ended up 5.5%, Anglo American closed up 4.7%, and Rio Tinto up 3.3%.

easyJet was the top FTSE 100 performer, up 5.7%. The budget airline upgraded its full-year profit guidance following a strong summer trading season, though analysts already are worried about industry overcapacity hurting results this winter.

easyJet said its pretax profit for the financial year to the end of September is now expected to be GBP675 million to GBP700 million, up from its previous guidance of GBP620 million to GBP660 million.

Wm Morrison Supermarkets finished up 4.7% after a report in The Daily Telegraph suggested South African billionaire Christo Wiese is now training his sights on the UK supermarket industry. Wiese, who owns a 19% stake in frozen food retailer Iceland and who has been linked with a takeover of Morrison in the past, told the Telegraph that his investment firm, Brait, may make its next venture in the UK supermarket sector.

The stock also was upgraded to Neutral from Sell by UBS, with a price target of 175p, up from 165p. It closed at 170.80p Thursday.

In the FTSE 250, Lookers was the best performer, up 9.2%. The motor retailer and aftersales services provider said it has struck an GBP87.5 million cash deal to acquire Addison Motors, which trades as Benfield Motor Group. Benfield is based in Newcastle-upon-Tyne and operates 30 car dealerships across northern England and Scotland, offering sales, service, parts and bodyshop facilities for new and used cars and commercial vehicles, Lookers said.

Analysts hailed the deal, with Numis describing the acquisition as a "major step" for Lookers. The broker said that "the new company helps to consolidate Lookers' position with key original equipment manufacturers and dovetails nicely in terms of location," adding it expects the acquisition to raise Lookers' level of profitability "significantly".

At the other end of the index, Go-Ahead Group ended as one of the worst performers, down 6.2%. The transport operator said its annual pretax profit was pulled lower by exceptional costs, and it will miss its operating profit goal for its bus division by a year. Go-Ahead said it now expects to hit its 'Target 100' GBP100 million operating profit target for the bus operations in the 2016-17 financial year, a year later than it had anticipated.

However, the company also said revenue rose sharply in the recent financial year, and its underlying profit was higher on the back of a better-than-expected outcome for its rail division.

In the economic calendar Friday, there are German factory orders at 0700 BST and eurozone GDP at 1000 BST. Then the main focus of the day is the US jobs report at 1330 BST.

In the UK corporate calendar, the only scheduled release is from healthcare software and services company EMIS, which reports half-year results.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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