Marks & Spencer Share News (MKS)

LONDON (Alliance News) - UK stocks closed mixed Thursday, with the Bank of England painting a more positive picture on the UK's economy, while the European Central Bank said that downside risks to the euro area related to emerging markets "had increased", although it needs more time to assess its ultimate impact.

The FTSE 100 index ended up 0.6% at 6,364.82, the FTSE 250 closed down 0.2% at 17,003.81 and the AIM All-Share finished down 0.1% at 732.89. European indices ended higher, with the CAC 40 in Paris and the DAX 30 in Frankfurt both up 0.2%.

Releases from central banks from the UK and Europe were the main focus in the morning.

Releasing its monetary policy decision and the minutes from its latest meeting at the same time on Thursday, the Bank of England decided 8-1 to maintain its interest rate at 0.5%, as Monetary Policy Committee member Ian McCafferty went against majority for the third consecutive meeting.

McCafferty said that building domestic cost pressures were likely to come to outweigh the dampening influence of the appreciation of sterling, causing inflation to overshoot the 2% target in the medium term.

On the inflation outlook, the central bank said it is likely to remain close to zero before picking up around the turn of the year. However, the bank said that from then inflation now appears likely to remain below 1% until Spring 2016.

"Although there remained a risk that emerging market prospects might deteriorate further, there had so far been few signs of a material effect on business and consumer confidence in the advanced economies," said the BoE minutes.

The bank highlighted that consumer confidence had remained "at a high level" in the third quarter. However, it said it continues to expect the UK economy to expand 0.6% in the third quarter, "a little" slower than in the second quarter.

The growth forecast from the BoE was slightly higher than the one provided by the National Institute of Economic and Social Research on Wednesday. The NIESR estimated that UK's economy grew 0.5% in the three months to August. The outcome was consistent with its latest quarterly forecast of 2.5% for this year.

BoE policymakers unanimously decided to maintain the stock of purchased assets financed by the issuance of central bank reserves at GBP375 billion.

The MPC is expected to release its quarterly Inflation Report, alongside with the next month's rate decision in November 5.

"Overall, the October MPC minutes were far more optimistic than the sanguine 'wait and see' minutes of September," said Kallum Pickering, senior UK economist at Berenberg. "The minutes contain some positive comments about the UK and going forward this should continue so long as the UK economy continues to show resilience."

At 1900 BST, Bank of England Governor Mark Carney participates in the International Monetary Fund annual meeting taking place in Lima, Peru, which will last until Sunday.

After the BoE, the European Central Bank published its monetary policy meeting accounts from the rate-setting session held in September.

The ECB said that downside risks to the euro area growth and inflation outlook, mainly those stemming from the slowdown in emerging economies and the volatility in forex markets, had "clearly increased", saying that it was "too early" to conclude that they will have a lasting impact.

"There was wide agreement that, while recent market volatility was a sign of increased risk and heightened uncertainty over the economic outlook, it was too early to form a sound judgement on whether such developments would have a lasting impact on euro area economic developments and, in particular, the medium-term outlook for inflation," said the ECB.

ECB Chief Economist Peter Praet pointed out the need to strike a right balance between recognizing increased downside risks and new sources of uncertainty, while avoiding drawing premature conclusions.

"Challenges facing emerging market economies were clouding the global outlook and were unlikely to recede quickly, while lower oil prices were expected to support domestic demand in the euro area, but not to fully compensate for the impact of weaker global demand and a stronger euro exchange rate," said Praet.

The International Monetary Fund this week retained its Euro area growth forecast for this year at 1.5%, while the outlook for next year was cut to 1.6%.

The ECB Governing Council reminded that its asset purchase program would be fully implemented and would run until the end of September 2016, and beyond, if needed.

After the London close, the US Federal Reserve is expected to release the minutes from its last policy meeting held in September at 1900 BST.

Before that, there were better-than-expected US initial and continuing jobless data. A report from the US Labor Department showed that initial jobless claims fell to 263,000 in the week ended October 3, a decrease of 13,000 from the previous week's level of 276,000. Economists had expected initial jobless claims to dip to 274,000.

On the other hand, the report said continuing jobless claims, a reading on the number of people receiving ongoing unemployment assistance, crept up by 9,000 to 2.204 million in the week ended September 26. However, that was slightly above expectations of 2.205 million.

US stocks were mixed at the London close, with the Dow Jones Industrial Average up 0.1%, the S&P 500 down 0.1% and the Nasdaq Composite down 0.8%.

Aluminium giant Alcoa is set to release its third quarter results after the US equity markets close. The release of results from Alcoa is seen as the unofficial start of earning season, as the aluminium giant is typically the first major company to report its results. However, Pepsico already released its third-quarter results on Tuesday.

Asian stocks were mixed with the Shanghai Composite index up 3.0%, as the Shanghai market returned to trade after a week long holiday. The Hang Seng index in Hong Kong was down 0.7% and the Japanese Nikkei 225 ended down 1.0%.

On the London Stock Exchange, satellite communications company Inmarsat led the blue-chip fallers, down 3.8%. It reiterated its guidance for the full year as it said no material change in its trading environment is expected for the rest of 2015.

The company said it expects group revenue for the full year to be USD1.25 billion to USD1.30 billion, including USD70.0 million in revenue from its cooperation agreement with LightSquared. The company is holding a Capital Markets Day on Thursday and said it will discuss its approach to future financial guidance.

Marks and Spencer Group closed down 1.9% after being downgraded by Peel Hunt to Sell from Hold. This comes a day after JPMorgan cut its recommendation on the retailer to Underweight from Neutral.

In the FTSE 250, FirstGroup ended up 4.4%, benefiting from an upgrade by UBS to Neutral from Sell. The bank said that it now sees limited further downside for the company's shares after a period of under performance. In the year to date, the stock has fallen by 4%.

Dunelm Group finished up 2.2% after the homeware retailer reported growth in sales in the first quarter of its financial year, which it said was due to improved product ranges, seasonal merchandise, and a better shopping experience for customers.

Meanwhile, recruiter Hays said that negative foreign exchange trends continued in the first quarter of its current financial year, although net fee income still rose amid robust trading. In its previous financial year Hays had to contend a drag from converting weak euros and Australian dollars into pounds.

In the financial year to the end of June, Hays said its net fee income rose 5.4%, but this was up 9.0% on a like-for-like, constant currency basis, following broad-based fee growth in the UK and Ireland, along with further robust performances in Asia Pacific and its Continental Europe and Rest of the World region. Shares in Hays ended down 6.6%.

In a light corporate calendar Friday, Vedanta releases its second-quarter production results, while XP Power issues a third-quarter interim management statement.

In the economic calendar, UK good trade balance data are due at 0930 BST. In the US, export and import price indices are expected at 1330 BST, while wholesale inventories are due at 1500 BST.

By Daniel Ruiz; danielruiz@alliancenews.com

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