LONDON (Alliance News) - London stocks ended firm Thursday, after European Central Bank President Mario Draghi left the door open to further economic stimulus at the central bank's next meeting in December, even saying that further interest rate cuts have been discussed.
The FTSE 100 index ended up 0.4% at 6,376.28 points, the FTSE 250 finished up 0.1% at 17,044.54, and the AIM All-Share was flat at 744.69 points. In Europe, the CAC 40 in Paris closed up 2.3%, and the DAX 30 in Frankfurt ended up 2.5%.
"Draghi proved a drag for euro bulls, yet European stock markets heard exactly what they wanted to today, pushing the likes of the FTSE 100, DAX 30 and CAC 40 higher following the ECB questions and answers session," said IG market analyst Joshua Mahony.
The European Central Bank left its key interest rates unchanged at a record low for a tenth consecutive policy meeting.
The ECB Governing Council left the refinancing rate at 0.05%, following the meeting in Malta, a decision that was widely expected by economists. The central bank also kept the marginal lending rate at 0.30% and the deposit rate unchanged at -0.20%.
More significantly, Draghi told a press conference that ECB policymakers had a very "rich discussion" regarding the various monetary policy tools available to them, including further interest rate cuts. Draghi said the ECB Governing Council discussed a reduction to the deposit rate, which is already in negative territory at -0.20%.
Draghi said that, while the Governing Council held "intense discussion" on the policy instruments, no specific choice was made at Thursday's meeting. He added that the ECB remains open to the whole menu of policy tools, and that the central bank's attitude is no "wait and see", but "work and assess".
Draghi also said that some ECB members wanted stimulus action on Thursday, but he added that it was not the general sentiment in the rate-setting body.
Draghi said the central bank is ready to adjust its EUR1.1 trillion asset purchase programme when needed, and pointedly said that ECB policymakers will focus on the possibility of further stimulus at its next monetary policy meeting on December 3.
"The strength and persistence of the factors that are currently slowing the return of inflation to levels below, but close to, 2% in the medium term require thorough analysis," Draghi said. "In this context, the degree of monetary policy accommodation will need to be re-examined at our December monetary policy meeting, when the new Eurosystem staff macroeconomic projections will be available."
In September, the ECB staff cut the inflation forecast for this year to 0.1% and lowered the projection for next year to 1.1%. Meanwhile, the outlook for 2017 was revised down to 1.7%. The downgrade was attributed mainly to lower oil prices. Eurozone inflation turned negative in September at -0.1%. However, core inflation was steady at 0.9%.
The ECB expects the eurozone economic recovery to continue, albeit damped in particular by weaker than expected foreign demand.
"The risks to the euro area growth outlook remain on the downside, reflecting in particular the heightened uncertainties regarding developments in emerging market economies, which have the potential to further weigh on global growth and foreign demand for euro area exports," Draghi said.
Following the ECB decision, the euro was sold down, standing at USD1.1156 at the London close, after being quoted at USD1.1313 prior to the ECB press conference.
Meanwhile, in the US, the earnings season continues with third-quarter results from technology companies Microsoft, AT&T and Alphabet, the company created by Google to hold the internet giant's businesses beyond its search engine. All are expected to be released after the US market close Thursday.
Sentiment in the US was helped Thursday by fast food giant McDonald's Corp, which reported third-quarter results that topped market expectations, supported by a sales recovery in China. E-commerce giant eBay also reported late Wednesday adjusted third quarter earnings per share and revenues above analysts' estimates. However, the company's fourth quarter guidance was weak. Shares in McDonald's were up 7.4%, while eBay was up 13%.
Wall Street was higher at the London close, with the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all up 1.3%.
The US Labor Department released a report showing a modest increase in initial jobless claims in the week ended October 17. However, the uptick was smaller than economists had expected.
The report said initial jobless claims edged up to 259,000, an increase of 3,000 from the previous week's revised level of 256,000. Economists had expected jobless claims to climb to 265,000. Meanwhile, continuing claims, an indicator of the number of people receiving ongoing unemployment assistance, rose by 6,000 to 2.170 million in the week ended October 10.
The data came ahead of the US Federal Reserve next two-day monetary policy meeting on Tuesday and Wednesday next week.
In the UK, the pound rose after UK retail sales were reported to have climbed at a faster-than-expected pace in September, driven mainly by falling in-store prices and promotions around the Rugby World Cup, held in the UK.
Data from the Office for National Statistics showed that retail sales including automotive fuel grew 1.9% month-on-month in September, exceeding economists' expectations for a 0.3% rise. Excluding auto fuel, retail sales rose 1.7% monthly in September, faster than the 0.3% climb expected by economists.
"The improvement in retail sales in the third quarter bolsters the view that UK domestic demand is continuing to improve despite risks abroad," said Kallum Pickering, senior UK economist at Berenberg.
Sterling spiked following the data, but at the London close it had already lost those gains, staying flat on the day. The pound rose to an intraday high of USD1.5509, but it was standing at USD1.5419 when European equities markets closed.
Gold was quoted at USD1,167 an ounce at the London close, while Brent oil was at USD47.97 a barrel.
On the UK individual stock front, Ashtead Group ended up 4.1%. The industrial equipment rental company were boosted by the read across from better-than-expected third quarter results from US peer United Rentals.
Meanwhile, GKN closed up 0.7%. The engineer said its sales in the first nine months edged higher but noted that its trading environment has shown signs of softening in the final quarter of the year. The company, which makes automotive and aerospace components and systems, said its sales for the nine months to the end of September were GBP5.68 billion, with a currency boost of GBP29.0 million offset by a GBP54.0 million decline due to disposals.
In the red, Travis Perkins was the worst blue-chip performer, down 6.0%, after it said its 2015 earnings are set to come in at the low end of market expectations due to continued challenges in its key markets in the third quarter
The builders' merchant and home improvement retailer said that despite planning for a reduction in repair, maintenance and improvement markets over the summer months, the actual slowdown in the market was worse than had originally been expected.
Despite continuing to outperform a weak UK market, the tougher-than-expected conditions mean the group now anticipates its full-year 2015 earnings before interest and taxation will be at the low end of market expectations.
Fellow building-products company SIG ended as the biggest decliner in the FTSE 250, down 21%. It said its sales performance had diverged in the first nine months between its UK and European operations and said continued weakness in the latter, plus some softness in the UK repair, maintenance and improvement market, mean it now expects its underlying pretax profit to fall year-on-year.
SIG said it now expects its underlying pretax profit for the year to the end of December to be GBP85 million to GBP90 million, compared to GBP98.1 million in 2014. The underlying figures strip out any exceptional items and the effects of acquisitions and disposals.
Other building materials companies were hit by the comments by their two peers. Kingfisher ended down 3.7%, Wolseley down 2.3%, Grafton Group down 4.2%, and Howden Joinery Group down 5.5%.
Cable and Wireless Communications ended as the top gainer in the FTSE 250, up 21%, after it confirmed at the market close that it is in talks with US cable company Liberty Global regarding a possible shares and cash offer for the company.
The company said that shareholders are advised to take no action, and added there can be no certainty any firm offer will be made, or the terms on which any offer may be made.
Under UK takeover code, Liberty Global, which is the owner of Virgin Media in the UK, has until November 19 to either announce a firm intention to make an offer, or walk away.
Zoopla Property Group was another strong mid-cap performer, up 7.8%. The online property portal said it expects revenue and its adjusted earnings before interest, taxation, depreciation and amortisation to grow for the year to the end of September and said it was seeing encouraging trends in its markets.
Ladbrokes ended up 4.6%, after analysts considered the betting company's results "poor" but in line with expectations. The bookie said group net revenue fell in the third quarter of 2015 as it faced a tough comparative period, and it reported a decline in earnings due to increased games duty and taxes. Ladbrokes said its proposed merger with Gala Coral is on track.
Davy Research said investors should focus on the merger, rather than on Ladbrokes' quarterly results.
In a light UK corporate calendar Friday, fellow bookmaker William Hill issues a third-quarter interim management statement, and Dechra Pharmaceuticals releases an AGM trading statement.
In the economic calendar, Japan's Nomura manufacturing Purchasing Manager's Index is due at 0235 BST. Before that, China's house price index is due at 0230 BST, while China's Caixin manufacturing PMI is due at 0245 BST. Japan and China leading economic indicators are due at 0300 BST and 0600 BST, respectively.
In Europe, France's Markit manufacturing PMI is due at 0800 BST, while the same from Germany and the eurozone are due at 0830 BST and 0900 BST, respectively. In the US, the Markit manufacturing PMI is due at 1445 BST.
By Daniel Ruiz; danielruiz@alliancenews.com
Copyright 2015 Alliance News Limited. All Rights Reserved.
11 Jan 2016 13:46
