International Airlines Share News (IAG)

LONDON (Alliance News) - London stocks ended mixed Thursday, with strong gains in the mining sector offsetting a poor performance among airline stocks, as the European Central Bank made no changes to its monetary policy, waiting to be in "a better position" to reassess the post-Brexit macroeconomic situation.

The FTSE 100 index ended down 0.4%, or 29.10 points, at 6,699.89. The FTSE 250 added 0.2%, or 28.53 points, to end at 17,047.42, and the AIM All-Share index rose 0.2%, or 1.60 points, at 738.27.

The ECB kept all of its key interest rates unchanged for a third consecutive time. The central bank's main refinancing rate remained at the record low of 0.0%, the deposit rate was held at -0.40%, while the marginal lending facility rate stood at 0.25%. The ECB's asset buying programme was left at its current level of EUR80 billion per month until March 2017.

The Governing Council will monitor economic and financial market developments very closely and aim to safeguard the pass-through of its accommodative monetary policy to the real economy, ECB President Mario Draghi said at his traditional press conference in Frankfurt after the decision announcement.

Draghi highlighted that, following the UK referendum on European Union membership, "euro area financial markets have weathered the spike in uncertainty and volatility with encouraging resilience".

Over the next months, Draghi said, the Governing Council will be "in a better position to reassess the underlying macroeconomic conditions, the most likely paths of inflation and growth, and the distribution of risks around those paths".

"If warranted to achieve its objective, the Governing Council will act by using all the instruments available within its mandate," Draghi reiterated.

Analysts expect the ECB to ease monetary policy at its next meeting on September 8, with some market participants expecting easing to come in the form of a size increase of the central bank's asset buying programme. However, Draghi did not hint to any potential measures.

The euro spiked to a high of USD1.1059 during Draghi's press conference, but was giving back those gains by the European equities close, standing at USD1.1005 compared to USD1.1007 at the close on Wednesday.

The CAC 40 index in Paris fell 0.1%, while the DAX 30 in Frankfurt rose 0.1%.

Central bank activity grabbed market attention prior to the ECB's expected non-event decision, as Bank of Japan Governor Haruhiko Kuroda said on a BBC Radio 4 programme broadcast on Thursday that there is "no need and no possibility for helicopter money" in Japan. Helicopter money refers to a monetary policy that involves printing large sums of money and distributing it to the public in order to stimulate the economy, like a helicopter scattering yen notes to a crowd.

Kuroda said that there is still room to use existing measures, by expanding quantitative and qualitative easing measures, and taking its deposit rate further into negative territory. "We have very powerful policy framework, and I don't think there's any significant limitation of further easing of monetary conditions in Japan if necessary," Kuroda said.

IG analyst Chris Beauchamp said investors' dashed hopes on helicopter money "could start to hit the hitherto strong move higher in the dollar-yen".

"Should this start to fall, we could see stock markets start to take a hit as well, as the dollar/yen pair is usually taken as one of the handiest guides as to the strength of global risk appetite," noted Beauchamp. At the European close, the dollar stood at JPY106.20.

The pound retreated against the greenback following data showing that retail sales in the UK had declined more than expected in June. A report released by the Office for National Statistics said retail sales fell 0.9% month-on-month in June, offsetting a 0.9% rise in May. On an annual basis, retail sales rose 4.3%, but this was below the 6.0% growth seen in May and expectations for a 5.0% rise.

Sterling was quoted at USD1.3233 prior to the retail sales data, declining to a low of USD1.3156 immediately thereafter. The pound has since recovered some ground, standing at USD1.3215 at the equities close.

In New York, at the European equities close, the Dow 30 index was down 0.3%, the S&P 500 was down 0.2% and the Nasdaq Composite was down 0.1%. In the US corporate calendar Thursday are telecommunications company AT&T and coffee chain Starbucks, both reporting quarterly results after the close on Wall Street.

US initial jobless claims saw an unexpected drop in the week ended July 16, according to a report released by the Labor Department. The report said jobless claims edged down to 253,000 from last week's 254,000. The small decline in jobless claims came as a surprise to economists, who had expected claims to climb to 265,000. The four-week moving average of continuing claims fell to 2.141 million from the 2,144 million seen in the previous week.

Gold stood at USD1,323.73 an ounce at the equities close, compared to USD1,318.57 at the same time Wednesday. Brent oil was quoted at USD46.68 at the close, against USD47.11 on Wednesday.

On the London Stock Exchange, airline stocks were dragged lower by a poor trading update from easyJet. The low-cost carrier reported a fall in revenue in the third quarter of its financial year, blaming flight cancellations resulting from terrorist attacks, bad weather and air traffic control strikes which offset a rise in seat capacity.

easyJet said total revenue in the quarter ended June 30 fell by 2.6% year-on-year to GBP1.20 billion, as revenue per seat declined by 7.7% to GBP54.54, despite the number of passengers carried rising by 5.8% to 20.2 million and load factor increasing by 0.3 percentage point to 92%.

easyJet shares ended down 4.6%, the biggest blue-chip decliner, followed by International Consolidated Airlines Group, down 4.1%. Wizz Air Holdings ended as the worst mid-cap performer, down 6.6%, whilst Irish carrier Ryanair Holdings fell 4.9%.

At the other end of the index, Ashtead Group ended up 4.2%. Shares in the equipment rental company rose after US peer United Rentals affirmed its outlook for 2016 following a strong second quarter, sending its own shares higher on Wednesday. The London-listed stock often moves based on trading updates from United Rentals due to Ashtead's high exposure to the US market through its Sunbelt business.

Mining stocks also limited the FTSE 100's losses, with the FTSE 350 Mining Sector index adding 1.8%, the first session of gains after four consecutive days of losses.

Mid-cap bookie William Hill shares added 8.5%. Chief Executive James Henderson has stepped down from his role with immediate effect, with Chief Financial Officer Philip Bowcock named as interim CEO. William Hill said it has started a search for a permanent replacement for Henderson. The company added that trading remains in line with its expectations.

Online household appliance retailer AO World rose 9.2% after saying it remains on track with its "long-term strategic plan" after a positive first quarter ended June 30.

Close Brothers Group ended 3.8% higher, after the financial services company said trading in the five months to the end of June was in line with its expectations and that it remains confident it will deliver a "solid" result for the year to July 31.

Highlights in the UK corporate calendar Friday are trading statements from Vodafone Group, Big Yellow Group and Acacia Mining, and half-year results from Beazley.

In the economic calendar, Purchasing Manager's Index readings from Japan, France, Germany, the eurozone and the UK are at 0300 BST, 0800 BST, 0830 BST, 0900 BST and 0930 BST, respectively. The same for the US is at 1445 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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