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(Alliance News) - London's FTSE 100 led the declines as European equities endured a difficult morning on Thursday, with global economic growth worries and fears of central bank tapering weighing on investor sentiment.
The energy, financial and mining sectors, which together make up a sizeable proportion of London's blue-chip index, were all lower.
"All three [are] driven by economic activity, which shows you how investors are thinking," AJ Bell investment director Russ Mould explained.
Mould added: "The ECB will be in focus later today as it is expected to update on any plans to taper bond purchases. The US Federal Reserve is unlikely to be in a rush to start easing its economic support measures following the very disappointing August jobs numbers, but will Europe finally be one step up on this point?"
The ECB Governing Council meets in Frankfurt, announcing its latest policy decision at 1245 BST. This will be followed by a press conference with President Christine Lagarde at 1330 BST.
The FTSE 100 index was down 85.93 points, 1.2%, at 7,009.60, leaving the large-cap benchmark dangerously close to dropping below to 7,000 point mark. The mid-cap FTSE 250 index was down 132.79 points, 0.6%, at 23,716.10. The AIM All-Share index was down 8.85 points, 0.7%, at 1,291.81.
The Cboe UK 100 index was down 1.3% at 696.97. The Cboe 250 was down 0.6% at 21,482.59, and the Cboe Small Companies was down 0.5% at 15,425.43.
In mainland Europe, the CAC 40 stock index in Paris was down 0.3% and the DAX 30 in Frankfurt lost 0.2%.
The euro advanced against the US dollar ahead of the ECB monetary policy decision. The single currency rose to EUR1.1833 on Thursday afternoon, from USD1.1815 late Wednesday.
"The most bullish scenario for the euro currency could be if the ECB reduces the asset purchases for one of its programmes. At the same time, if it lifts its economic projections for the region. The euro could skyrocket under that scenario. The most bearish scenario may be if the bank doesn't touch its asset purchase programme and it doesn't sound very optimistic about economic projections as well. Under that scenario, we could see the euro really taking a massive move to the downside," Avatrade analyst Naeem Aslam commented.
"The ECB has two important asset purchase programmes: the pandemic emergency purchase programme and the asset purchase programme. The ECB may likely reduce PEPP and leave the APP untouched. But tapering any of these programmes is highly likely to be considered a hawkish sign by the market players, which could be positive for the euro."
Against the dollar, the pound rose to USD1.3811 on Thursday afternoon, from USD1.3745 at the London equities close on Wednesday. Against the yen, the dollar was trading at JPY109.90, down from JPY110.40.
With cyclical stocks among the worst performers on Thursday, the FTSE 100 struggled.
Miner Rio Tinto fell 2.4%, lender HSBC gave back 1.6% and oil major BP lost 1.4%.
British Airways parent International Consolidated Airlines Group fell 2.8%, in a negative read across after a fundraise by easyJet sparked fears that other carriers may need to go cap in hand to investors for more cash.
easyJet itself was down 8.7%, among the worst mid-cap performers. The budget airline said it is planning to raise GBP1.2 billion in a fully underwritten rights issue in order to emerge from the pandemic on the front foot.
easyJet added it recently rejected an unsolicited preliminary takeover approach. The bidder has since confirmed it is no longer eyeing the company.
"The indicative proposal took the form of a low premium and highly conditional all-share transaction which, in the board's view, fundamentally undervalued the company," said easyJet.
Alongside the equity issue, it has secured new bank financing commitments to boost liquidity. It has agreed a new four-year senior secured revolving credit facility of USD400 million.
"The fact that easyJet is raising more money to help to capitalise on growth opportunities would suggest that some of IAG's peers are getting their ducks in a row to accelerate their recovery, whereas the British Airways owner is still plagued by high debts," AJ Bell's Mould added.
easyJet said UK domestic capacity in August was more than double pre-pandemic levels, while intra-EU capacity was at 81%.
It expects capacity in the fourth quarter to strengthen to 57% of pre-virus numbers, compared to just 17% in the third quarter, and sees first quarter passengers at up to 60% of pre-pandemic levels.
Elsewhere in London, Ryanair was down 1.4%, while Wizz Air lost 1.9%.
Genus plunged 9.9% as the biotechnology products provider for cattle and pig farmers tipped volatility ahead. In the first half of 2021, however, earnings climbed.
Revenue in the six months to June 30 rose 4.2% to GBP574.3 million from GBP551.4 million a year earlier. Pretax profit was up 21% to GBP55.8 million from GBP46.3 million.
"Genus performed very strongly and made significant strategic progress in the 2021 fiscal year. The group continued to show its resilience during the Covid-19 pandemic and I would like to thank our people who have shown great dedication to our customers whilst navigating the many challenges that the pandemic has caused," Chief Executive Stephen Wilson added.
However, Wilson warned that "recent volatility in the Chinese porcine market" will only get worse.
"As a result of this headwind, and despite an expected strong performance in the other areas of the business, we expect Genus's growth to be lower than our medium-term goal in the current year before increasing again in FY23," Wilson added.
Computacenter rose 3.0%, topping the mid-cap index, after a first half that saw profit widen substantially for the group despite some supply challenges which the firm cautioned are set to continue.
Pretax profit for the six months ended June 30 was GBP115.2 million, significantly wider than GBP72.4 million in the prior year period. The bottom line was bettered by Covid-19 related cost reductions and a further improved Services & Technology Sourcing margin.
Interim revenue hit GBP3.18 billion, a rise of 29% from GBP2.46 billion in the prior year period partly affected by the pandemic.
Recruiter Hays was among the next best mid-cap performers, up 1.9%, after Barclays raised the stock to Overweight from Equal-Weight.
Elsewhere in London, Draper Espirit fell 2.6% after Jefferies cut the venture capital firm to Hold from Buy.
Brent oil was quoted at USD72.74 a barrel midday Thursday, up from USD72.35 late Wednesday. Gold improved to USD1,795.29 an ounce, from USD1,791.85, though the precious metal fell short of hitting the USD1,800 mark, despite slight US dollar weakness.
"Gold continues to warn that its upward momentum had waned materially and that its rally is in trouble," Oanda analyst Jeffrey Halley commented.
"Should the US dollar fall by chance tonight and gold not rally still, the outlook will become darker still."
New York futures were lower on Thursday. The Dow Jones Industrial Average is called down 0.2%, and the S&P 500 0.3% lower. The tech-heavy Nasdaq Composite is called down 0.2%.
Still to come on Thursday are the latest US jobless claims numbers at 1330 BST.
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