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LONDON (Alliance News) - London stocks are trading lower in a broad-based sell-off Friday, as investors pore over the actions of the Swiss National Bank, which shocked markets on Thursday by removing its exchange rate peg to the euro, a move that many suggest means the European Central Bank could introduce broader stimulus measures as early as next week.
"The effects of yesterday?s Swiss National Bank action are still washing through the financial markets as currencies, equities and commodities all saw aggressive moves," said Alastair McCaig, market analyst at IG.
The FTSE 100 is down 0.4% at 6,475.03 from Thursday's close of 6,498.78.91. The index closed up 1.7% in volatile trading after the Alpine nation's central bank removed its CHF1.20 cap against the euro and lowered its deposit rate to minus 0.75%, raising the prospect of broader measures being introduced at next week's policy meeting by ECB President Mario Draghi to kickstart the moribund European economy.
The FTSE 250 is down 0.6% at 15,814.97 and the AIM All-Share index is down 0.2% at 696.04.
"The SNB must have a very strong inclination that the European Central Bank is about to begin a large-scale quantitative easing program which would act to depreciate the euro and make a defence of the Swiss franc peg impossible," said Jasper Lawler at CMC Markets.
Before the SNB action, the European Court of Justice gave a positive assessment of the ECB's so-called Outright Monetary Transactions programme, clearing the way for ECB President Mario Draghi to launch a government bond-buying programme, possibly as early as next week when the ECB policy-making council meets for the first time this year.
The Swiss move caused volatility across the markets, particularly in forex, where the euro quickly slid to an 11-year low against the dollar. The gold price rose, while equity indices across Europe dropped sharply before recovering. Early Friday, the euro stood at USD1.1623.
"While the markets have stabilised a little, the damage caused could have a longer term impact on the markets," said Craig Erlam at Alpari. "It will be interesting to see in the coming weeks what this does to liquidity and volumes in the forex markets, with many predicting that this may do significant damage for the foreseeable future."
The DAX in Germany is down 0.5% and the CAC-40 in Paris is down 0.3%.
Inflation figures released from Germany and the euro area on Friday will provide further insight into the likely timing of broader stimulus measures.
German December CPI was reported up 0.2% on the year and flat on the month, both unrevised. December HICP rose 0.1% on both the month and the year, also unrevised.
Eurozone inflation data confirmed initial readings, with December consumer prices dropping 0.1% from November and falling 0.2% from a year earlier. Both sets of data follow figures from Spain which showed the country fell further into deflation in December, with consumer prices falling 0.6% month-on-month from a fall of 0.4% in November.
Brent crude is quoted at around USD49.60 a barrel Friday, up again after touching a new six-year low of USD45.16 during Tuesday's session. US benchmark West Texas Intermediate was quoted at USD47.43 a barrel, up from a low on Tuesday of USD44.17.
Wall Street is set to follow Europe lower ahead of the long weekend. Futures are pointing to a 0.3% drop for the DJIA and the S&P 500, and a 0.7% drop for the Nasdaq 100. US Markets are closed on Monday for Martin Luther King, Jr. Day.
US consumer price inflation is due at 1330 GMT, December industrial production at 1415 GMT, and the Reuters/University of Michigan consumer sentiment index reading for January due at 1455 GMT.
In corporate news, BP is up 2.6% after a US district court ruled the company was 'not grossly negligent' in its source control efforts following the Deepwater Horizon disaster, capping its fine for the Clean Water Act at USD13.7 billion, considerably less than the USD18 billion sought by the Justice Department.
JD Sports Fashion is up 5.3% after saying it expects its pretax profit for the year to the end of January to come in ahead of market expectations following a rise in sales over the Christmas period. The FTSE 250-listed retailer said like-for-like sales rose 12% in the five weeks to January 3, noting the rise comes against strong comparative figures in the year-earlier period. Investec raised its price target on the stock to 610 pence from 540p, keeping the stock at Buy.
Spectris is the third highest climber in the FTSE 250, up 4.7%. The instrumentation and controls company said it expects its adjusted operating profit to be around GBP198 million for 2014, in line with previous guidance, as it saw sales up 5% in its fourth quarter on both a reported and constant currency basis.
MoneySupermarket.com said it expects full-year revenue growth of 10% to GBP248 million after fourth-quarter revenue rose 4% to GBP58.9 million. Its shares are up 0.6%.
Japan's Nikkei closed down 1.4% Friday at 16,864.16. The Hang Seng in Hong Kong ended down 1% at 24,103.52, but the Shanghai Composite finished 1.2% higher at 3,376.495.
By Ian Edmondson; ianedmondson@alliancenews.com
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