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LONDON (Alliance News) - The FTSE 100 suffered a fourth consecutive day of losses Thursday, ending at its lowest closing level for nearly eight months, as fears grew that the European Central Bank wasn't being desicive enough to pull the eurozone out of its economic woes.
The ECB kept all its key interest rates unchanged, with the central bank's President Mario Draghi saying they couldn't go any lower. The bank then outlined the details of its asset purchase schemes, but left investors, some of whom had hoped for a full-blown quantitative easing programme, underwhelmed.
Draghi said that the central bank would start purchasing covered bonds and asset-backed securities in the fourth quarter, starting with covered bonds in the second-half of October. The bank said it will buy senior tranches with credit assessments of at least BBB-, but surprised markets by including Greek and Cypriot assets, albeit with special conditions attached.
"The market clearly have a disdain for any policy's effectiveness apart from a quantitative easing programme and thus today's subsequent sell-off is not surprising. Until there are any signs that these programmes work, markets are unlikely to be overwhelmed by their implementation," said Alpari Analyst Joshua Mahony.
"As expected, the ECB fleshed out details of its Asset Backed Securities and covered bond buying programs, but it did little to suggest that there are any further policy initiatives imminent," said Howard Archer, Chief UK and European Economist at IHS Global Insight.
"In particular, the ECB does not appear poised to pull the QE trigger in the immediate future at least, which likely at least partly reflects intense German opposition to such a move," he added.
The FTSE 100 closed down 1.7% at 6,446.39, while the FTSE 250 and AIM All-Share index both closed the day their lowest levels so far in 201. The FTSE 250 fell 1.4% to 15,005.19 and the AIM All-Share ended down 0.7% at 738.45.
European equity markets fell even more, with the French CAC 40 closing 2.6% lower and the German DAX ending down 1.8%.
The selloff continued into the US, with the DJIA down 0.5%, the S&P 500 down 0.6% and the Nasdaq Composite down 0.6% when the European markets closed.
Equities weren't the only asset class suffering Thursday. Crude oil extended recent losses during the European morning amid mounting worries about a supply glut, despite an unexpected drop in US crude stockpiles. At one stage, US crude oil futures for November delivery hit a 17 month low below USD90 a barrel.
Still, the futures rallied later in the session to end higher, after some upbeat economic news from the US showed initial claims for unemployment benefits to have dropped more than expected last week. Nonetheless, the uptick in oil prices were somewhat limited with the dollar weakening against a select band of currencies.
BG Group was amongst the biggest fallers in the FTSE 100, with its shares declining 3.6%, as it was hit by the oil price falls. The company also confirmed that it has withdrawn from the Block 3 drilling programme in Tanzania, for which it was operator. As a result, FTSE 250-listed Ophir Energy said it will increase its interest in the block to 80%, from 20%, will become the operator of the license, while Pavilion Energy will retain its original 20%. Before withdrawing, BG Group had a 60% interest and was the operator of the license.
Ophir Energy said separately Thursday that it has discovered 1.03 trillion cubic feet of gas in the Kamba and Fulusi prospects from its Kamba-1 well in Tanzania, which is in Block 4. Shares in the company closed 0.3% higher after spending much of afternoon trading amongst the top performing FTSE 250 stocks.
Hargreaves Lansdown was the biggest of the six gainers in FTSE 100. The company received an upgrade to Buy from Add by Numis, which says that the company has the ability to fend off new competition into the do-it-yourself investment market. The brokerage also highlighted changes in the UK pension market will also give the company a boost.
William Morrison Supermarkets fueled the price war in the UK grocery sector, becoming the first of the UK's four big supermarkets to start matching prices with upcoming German discount grocers Aldi and Lidl, as it launched its new price match and points card programme 'Match & More.' The company will provide a price-match guarantee against its bigger rivals Tesco, J Sainsbury and Wal-Mart-owned Asda, as well as the German discounters, which have been scooping up sales and market share from the UK's big four.
Morrison shares closed the day 0.6% lower while Tesco shares fell 1.1%. Sainsbury's was the worst performing stock in the blue-chip index, declining 3.9%.
The main economic focus for Friday will be the US non-farm payroll data for September to be released at 1330 BST. The figure is expected to come in at 215,000, up from August's print of 142,000. The US unemployment rate for September will be released simultaneously, while ISM non-munfacturing PMI for the same month will be released at 1500 BST.
Also being released Friday will be Markit services PMI data for September from a host of European countries, the UK and Japan.
The corporate calendar is quite light on Friday, with a trading statement from FTSE 100-listed airline easyJet and an interim management statement from FTSE 250-listed Dunelm Group.
By Neil Thakrar; neilthakrar@alliancenews.com
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