LONDON MARKET MIDDAY: Airline Stocks Decline, Miners Rise Ahead Of ECB

LONDON (Alliance News) - Stock prices in London were mostly in negative territory Thursday midday, with airline stocks hit by a negative update from easyJet and miners recovering ground from previous losses, as investors await for the European Central Bank monetary policy decision due at 1245 BST.

The FTSE 100 index was down 0.3%, or 22.58 points, at 6,706.41, and the FTSE 250 was down 0.3% at 16,970.86. However, the AIM All-Share index was up 0.2% at 737.90.

"Equities are negative this morning as markets take their usual breather ahead of a major central bank update, adopting a holding pattern before the ECB this afternoon and after strong July gains," said Accendo Markets analyst Michael van Dulken.

The central bank is not expected to make any changes to monetary policy at its meeting, but economists and analysts believe a move in September is more likely, after the downside risks facing the eurozone economy were increased by the UK's vote to leave the European Union.

The ECB decision will be followed by a press conference with President Mario Draghi at 1330 BST.

"Draghi's press conference is likely to be littered with the usual dovishness to keep investors happy about accommodative policy for longer. And while hopes of helicopter money in Japan may have been dashed this morning, markets aren't quite reaching for the ejector seat," noted van Dulken.

The FTSE 100 gave back some gains after 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 take 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 monetary condition in Japan if necessary," Kuroda said.

The pound took a hit following data showing that retail sales in the UK by 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 since has recovered some ground, standing at USD1.3209 at midday.

Elsewhere in the economic calendar, there are US initial and continuing jobless claims are 1330 BST, at the same time as Philadelphia Fed Survey and the Chicago Fed national activity index.

In Europe, the CAC 40 index in Paris was down 0.3%, while the DAX 30 in Frankfurt was off 0.1%.

In Asia, the Japanese Nikkei 225 index closed up 0.8%, the Shanghai Composite rose 0.4% and the Hang Seng in Hong Kong added 0.5%.

Stocks in New York were called for a negative open after Wednesday's all-time highs in the Dow 30 and the S&P 500 indices. The Dow and the S&P are both seen down 0.1%, while the Nasdaq 100 is expected to open flat. The Dow closed Wednesday at a record high of 18,595.03, having touched 18,622.01 earlier. The S&P 500 ended at 2,173.02, also a record close, having set a new high of 2,175.63 earlier.

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.

On the London Stock Exchange, airline stocks were heavily down after easyJet reported a fall in revenue in the third quarter of its financial year. The low-cost carrier blamed flight cancellations resulting from terrorist attacks, bad weather and air traffic control strikes 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 was down 6.6%. This dragged shares in Iberia and British Airways parent International Consolidated Airlines Group, down 3.7%, and mid-cap central and eastern Europe-focused airline Wizz Air Holdings, down 4.8%. Irish carrier Ryanair Holdings was down 4.4%.

Shares in Land Securities Group were down 2.1%. The commercial property investor said it anticipates uncertainty in the business world will persist until some clarity emerges on a post-Brexit UK.

Robert Noel, the chief executive of the FTSE 100 constituent, speaking ahead of Land Securities' annual general meeting, said that until clarity is provided on the timing and terms of the UK's exit from the European Union, uncertainty will persist. He added he anticipates this could "take some time".

Among blue-chip gainers were miners, with the FTSE 350 Mining Sector index up 2.7%, the best performing sector index, recovering some ground after four consecutive days of losses.

Equipment rental company Ashtead Group was up 4.5%, 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.

AO World was the biggest mid-cap gainer, up 7.8%. The online household appliance retailer said it remains on track with its "long-term strategic plan" after a positive first quarter ended June 30.

Shares in bookie William Hill were adding 6.0%. 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.

Close Brothers Group was 2.4% 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.

By Daniel Ruiz; danielruiz@alliancenews.com

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