GOG.L Share News (GOG)

LONDON (Alliance News) - Stocks across Europe were trading higher midday Thursday, with investors feeling more confident in buying equities with Chinese markets closed for a holiday and ahead of the European Central Bank's rate decision and press conference.

The FTSE 100 index traded up 1.4% at 6,171.05, the FTSE 250 was up 0.9% at 17,034.39 and the AIM All-Share up 0.6% at 734.49.

European stocks also were firm, with the CAC 40 index in Paris up 1.2% and the DAX 30 in Frankfurt up 1.6%.

US futures indicated a higher open, with the Dow 30, S&P 500 and Nasdaq 100 all pointed up 0.4%.

"European equity markets are racing higher as traders rejoice in the closure of the Chinese markets," said David Madden, market analyst at IG. "Previously, dealers have been cautious about bargain hunting after many had their fingers burnt, but with China closed until next week traders are taking advantage while they can."

The Shanghai market is closed both Thursday and Friday, while Hong Kong is closed Thursday only, to mark the 70th anniversary of China's victory over Japan in World War II.

Heavy recent falls in Chinese stocks and concerns about the state of the country's economy has bled over into global equities and commodities markets, causing prices to dive. However, with China coming back from holiday on Monday and uncertainty still apparent, IG's Madden questions how long these gains will be sustained.

In the meantime, investors are looking ahead to ECB's interest rate decision at 1245 BST, and subsequent press conference at 1330 BST in Frankfurt.

The central bank is largely expected to keep its benchmark refinancing rate unchanged at 0.05%. The ECB has kept interest rates on hold since September last year as part of its efforts to boost liquidity in the 19-member eurozone's financial sector and fire up the region's economy.

However, with inflation slowing due to further falls in the world oil price, the ECB is likely to cut its inflation forecasts for the euro area. There also is an expectation that President Mario Draghi will say the bank is weighing new measures aimed at spurring economic growth and inflationary pressures in the eurozone.

Inflation remained stuck at just 0.2% in August, according to data released this week, while a three-month long rout in Chinese stocks has sparked global financial market turmoil.

ECB chief economist Peter Praet said last week the bank stood ready to expand or extend its EUR1.1 trillion quantitative easing programmed for private and public sector bond-buying to ensure the bank met its annual inflation goal of just below 2%.

The International Monetary Fund also called on the ECB Thursday to consider extending its quantitative easing programme in the face of global economic risks such as the current downbeat economic picture emerging in China.

However Societe Generale believes the ECB will take no action in the meeting this week and will only make small adjustments to its projections.

"With headline inflation still expected to rise in the near term and resilient forward-looking indicators, we expect the ECB to stay on hold at this meeting, and we maintain our forecast of an extension of the QE and [targeted longer-term refinancing operations] programmes in the spring of next year, also adding corporate bonds," SocGen said.

When the ECB announced its quantitative easing programme near the end of January, it said the programme will continue until September 2016. However, it is effectively open-ended, as 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.

Craig Erlam, senior market analyst at Oanda, also believes that the ECB is not ready to expand its quantitative easing programme.

"It is becoming more widely accepted that further monetary stimulus is warranted from the ECB, the only questions that remain is when and how much. Some expect the ECB to expand its quantitative easing program today, but I’m not convinced this is the right time," Erlam said.

"We don’t have all the data yet and therefore don’t know what the full impact of recent market volatility and yuan devaluation will be. Surely policy makers will want to make an informed decision rather than rushing into it," the Oanda analyst added.

In the UK, services growth unexpectedly slowed for second straight month in August to its weakest rate in over two years as new business growth eased, survey results from Markit Economics and the Chartered Institute of Procurement & Supply showed.

The Markit/CIPS services purchasing managers' index dropped to 55.6, which was the weakest score since May 2013. That was in contrast to economists' expectation for a modest improvement in the reading to 57.7 from 57.4 in July. A PMI score above 50 indicates expansion in the sector, and the latest reading remained above the long-run survey average of 55.2.

The pound immediately dived against the dollar in response but recovered the losses soon after. At midday it traded the greenback at USD1.5277.

In the London Stock Exchange, easyJet was the best performer in the FTSE 100 up 5.5% after the low-cost airline upgraded its full-year profit guidance following a strong summer trading season.

The company 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. The group said its strong revenue performance over the summer has more than offset any cost challenges it has faced this year and said it passenger numbers and load factor both hit record levels in August.

Wm Morrison Supermarkets was up 3.9% 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 was quoted at 169.40p midday Thursday.

In the FTSE 250, Lookers was the best performer, up 7.8%. 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 the UK, 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 was the worst performer, down 6.9%. 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 AIM, Forbidden Technologies was down 16%. The company, which owns and develops cloud video platform Forscene and video social network eva, said it made a GBP1.4 million pretax loss in the six months to June 30, compared with GBP1.2 million in the corresponding half the prior year. Revenue was down to GBP327,338 from GBP348,077, while operating costs rose to GBP1.4 million from GBP1.3 million. Deferred and future revenue from agreed deals increased to GBP220,000 from GBP33,000 six months earlier.

Aside from the ECB, still in the economic calendar are US Challenger job cuts data at 1230 BST, while continuing and initial jobless claims are expected at 1330 BST. US Markit services and composite PMIs are due at 1445 BST, while US ISM non-manufacturing PMI is expected at 1500 BST. EIA natural gas storage is due at 1530 BST.

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

Copyright 2015 Alliance News Limited. All Rights Reserved.