LONDON MARKET MIDDAY: Oil Bounce, ECB Stimulus Hopes Drive Stock Rally

LONDON (Alliance News) - Investors on Friday picked up where they left off on Thursday and pushed stocks significantly higher at midday, as they welcomed European Central Bank President Mario Draghi's stimulus hints and a rebound in oil prices to above the USD30 a barrel mark.

In London, the FTSE 100 traded up 2.4% at 5.914.37, building on Thursday's gains and taking back all of the losses from the index's 3.5% decline on Wednesday. The FTSE 250 was up 1.7% at 16,096.36 and the AIM All-Share was up 1.2% at 685.17. In Europe, the CAC 40 in Paris was up 3.3% and the DAX 30 in Frankfurt up 2.2%.

The positive sentiment was spreading to New York ahead of the Wall Street open, with futures pointing the DJIA up 1.2%, the S&P 500 up 1.4% and the Nasdaq 100 up 1.7%.

Oil-related stocks were amongst the best performers in London's main indices as oil prices continued their rebound from late Thursday. Brent reached a high of USD31.30 a barrel Friday, and at midday was quoted at USD31.06. West Texas Intermediate traded at USD31.01 a barrel.

"Oil prices have jumped to a five-day high back above USD30 per barrel and, should gains be preserved, have the best week in three months," said Jasper Lawler market analyst at CMC Markets. "There hasn't been a real fundamental catalyst for the rebound in oil. US weekly inventories actually saw a bigger build than expected."

In the FTSE 100, Royal Dutch Shell 'A' shares were up 5.8%, BG Group traded up 5.1% and BP up 3.8%. In the FTSE 250, Tullow Oil led the gainers, up 15%, oil-services companies Petrofac and AMEC Foster Wheeler were up 7.2% and 6.2%, respectively.

It wasn't just oil prices which were boosting stocks. In Draghi's post-rate-decision press conference on Thursday, the ECB president hinted that more stimulus measures may come at the next meeting of policymakers in March, as downside risks such as global uncertainty, market volatility and geopolitics have increased.

Draghi also said - no fewer than four times - that there are "no limits" to the policy tools the bank can use to reach its inflation goal and to boost euro area growth.

UBS economist Reinhard Cluse said that following the December stimulus package, the bank expected the ECB was "essentially done" with further easing measures, but this call no longer seems tenable.

"We see it likely that the ECB will cut its deposit rate by another 10 basis points to -0.4% and make further amendments to its [quantitative easing] programme, with an increase of its monthly asset purchases (possibly adding EUR10 billion to its current level of EUR60 billion) and/or a further extension in the maturity of the programme beyond March 2017," Cluse said, adding the exact structure of the package will depend on incoming data.

The easing expectations meant weak flash purchasing managers' index readings from Europe on Friday were largely overlooked.

Preliminary data from Markit Economics showed Eurozone private sector growth slowed more-than-expected at the start of the year to its weakest level in eleven months, as expansion in both manufacturing and services sectors eased.

The composite PMI, which combines manufacturing and services, fell to 53.5 from 54.3 in December. Economists had forecast a modest decline to 54.2.

In the UK, retail sales also declined by more than expected in December, figures from the Office for National Statistics revealed. Retail sales fell 1.0% in December from November, when they grew 1.3%. Economists had forecast a 0.3% drop for December.

Excluding auto fuel, retail sales dropped 0.9% month-on-month after rising 1.3% in prior month.

In UK corporate news, WPP traded up 3.2%. The advertising and marketing giant said it has acquired a majority stake in German digital agency Conrad Caine, via its digital agency POSSIBLE Worldwide.

Conrad Caine was founded in 1998 and employs 140 people across its headquarters in Munich, Germany, and other offices in Pelotas, Brazil and Buenos Aires, Argentina. It reported revenue of EUR8.5 million in 2014 and had gross assets of EUR3.6 million as at the end of 2015.

Pearson traded down 2.8%, after rising 17% on Thursday when the education and publishing company tabled extensive restructuring plans and pledged to maintain its dividend.

Petroceltic International was the biggest gainer in the London market on Friday, up 79% after Worldview Capital Management, which owns a 29.6% stake in the oil and gas company and which has been pushing for the removal of board members and the restructuring of the company, said it was considering making a cash takeover offer for Petroceltic.

Worldview has heavily criticised Petroceltic in the past, with a failed attempt to remove the company's chief executive and accusations of corruption levelled against the company.

Mobile Streams was up 60% after saying it expects to report a small loss before interest, tax, depreciation and amortisation for its first half, swung from a small profit in the previous year, hit by further devaluation of the Argentinian peso. However, the mobile content company said it has signed two major contracts in India and is focused on continuing to grow in that market.

Pinnacle Technology Group was one of the worst performers in the AIM All-Share index, down 27%. The IT services company said it plans to raise around GBP4.6 million to help fund its acquisition of Ancar-B Technologies and Weston Communications, as it reported a narrowed pretax loss for its most recently ended financial year.

Pinnacle will raise the GBP4.6 million through the placing of up to 108.4 million shares at a price of 4.2 pence, a big discount to its closing share price of 12.31p on Thursday. The stock was quoted at 9.11p at midday Friday.

For the year to end-September the company reported a pretax loss of GBP1.4 million, narrowed from a pretax loss of GBP1.9 million a year before, as a fall in revenue to GBP7.9 million from GBP8.4 million was offset by a reduction in operating expenses and exceptional costs not recurring.

Still ahead in the economic calendar, the Chicago Fed national activity index is at 1330 GMT, before flash US Markit manufacturing PMI at 1445 GMT, and existing home sales at 1500 GMT. The Baker Hughes US oil rig count is at 1800 GMT, after the close of European stock markets.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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