LONDON MARKET MIDDAY: Shares Trade In Tight Range Before ECB Decision

LONDON (Alliance News) - Stock prices in London fluctuated narrowly between gains and losses on Thursday, as investors took a cautious stance ahead of the European Central Bank's policy announcement and press conference in the early afternoon.

At midday, the FTSE 100 was up 0.2%, or 11.50 points, at 6,913.73, having traded in a tight range throughout the morning. The FTSE 250 was up 0.3% at 17,683.95 and the AIM All-Share was down 0.1% at 812.47.

The BATS UK 100 index was up 0.3% at 11,692.24, the BATS 250 up 0.4% at 16,085.91, and the BATS Small Companies up 0.1% at 10,274.50.

In Europe, the French CAC 40 index was up 0.2% and the German DAX 30 was up 0.3%.

The ECB is due to make its policy announcement at 1245 GMT, followed by a press conference with President Mario Draghi in Frankfurt at 1330 GMT.

The central bank is widely expected to prolong its monetary support for the eurozone by announcing an extension to the duration of its asset purchase programme.

At its last monetary policy meeting in October, the ECB confirmed that monthly asset purchases of EUR80 billion were intended to run until the end of March 2017, "or beyond, if necessary". Analysts expect the central bank to extend its quantitative easing programme, at least, to September 2017, leaving the stock of assets unchanged.

Despite the expected extension, the market is concerned the ECB will consider beginning to gradually wind down asset purchases.

"With market expectations already factoring in an extension, it is likely that the volatility could come about through any imposition of a tapering plan, with the bank having to find a way to gradually reduce the size of asset purchases as we approach the end of the programme," said IG's market analyst Josh Mahony.

However, Craig Erlam, senior market analyst at Oanda, believes tapering QE at this stage would be "unthinkable".

"With inflation still well below target and the eurozone economy recovering gradually but with enormous amounts of slack still remaining, it seems unthinkable that the ECB would consider tapering its asset purchases today in order to deal with the problem of asset availability," Erlam said.

"I think it's more likely and far more sensible for it to alter the structure of the program slightly in order to accommodate more purchases," the Oanda analyst added.

Ahead of the open on Wall Street, futures indicated the Dow Jones Industrial Average and S&P 500 flat and the Nasdaq 100 up 0.1%. The Dow and S&P 500 both managed to make new record highs on Wednesday.

On the London Stock Exchange, Capita was the worst FTSE 100 performer, down 9.4%, after it cut its profit forecast for 2016 again, as it outlined plans for a sale of some of its businesses in an attempt to combat difficult market conditions that it now expects to continue into 2017.

In a pre-close trading update, outsourcer Capita said it now expects 2016 profit to be GBP515.0 million, lowered from previous guidance of GBP535.0 million to GBP555.0 million, due to a slowdown in client spend and issues in its IT Enterprise Services division. Capita forecast revenue of around GBP4.80 billion for 2016.

The downgraded profit forecast comes after Capita already cut its profit expectations in September.

WPP was the biggest gainer in the blue-chip index, up 3.2%, after Jefferies upgraded the media buying giant to Buy from Hold. Jefferies believes the reported US Department of Justice investigation into bid rigging by advertising agencies will have a limited impact on WPP. The broker also raised its revenue forecasts for WPP due to better contributions from acquisitions.

Meanwhile, The Times reported that a group of UK members of Parliament are set to publish the findings of a six-month inquiry into fixed-odds betting terminals, with expectations they will call for stricter controls.

The suggestion of an imminent crackdown on the machines hit shares in bookmakers William Hill, down 7.7% and Ladbrokes Coral Group, down 7.5%. The pair have the largest high-street bookie estates in Britain and so would be hit badly by stricter controls on the betting terminals.

The cross-party parliamentary group sees a case to cut the maximum stake allowed on the machines to GBP100 per spin and to slow the speed at which customers can make bets, currently once every 20 seconds, the newspaper said.

Sports Direct International was down 7.4%, following a slew of news about the sports clothing and equipment retailer, led by its report of a fall in interim profit falling by a quarter due to provisions and the weak pound.

The sports clothing and equipment retailer also said it has paused its share buyback programme and has appointed a new non-executive director to its board. Meanwhile, a probe into Sports Direct's 2015 accounts was closed by the UK's accounting watchdog.

Novae Group said increased losses in the second half mean its underwriting profit is likely to be lower than previous expectations.

The insurer said that in the second half of 2016 it has seen a "continued prevalence of larger individual risk and catastrophe losses". While its attritional loss ratio has remained steady, the impact of larger individual risk losses "means that underwriting contribution for the year is likely to be lower than our prior expectations".

Novae forecast its overall combined ratio, a key measure of profit for underwriters, to be within 98% and 100% for 2016 as a whole. The further below 100% the ratio is, the more profitable the underwriting business. The stock traded down 19%.

Aside from the ECB, still ahead in the economic calendar are US initial and continuing jobless claims at 1330 GMT.

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

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