LONDON MARKET MIDDAY: Stocks Tread Water Ahead Of ECB Decision

LONDON (Alliance News) - Stocks in London edged higher midday Thursday, continuing to track movements in world oil prices as investors awaited the European Central Bank's monetary policy decision and press conference.

The ECB is widely expected to keep its interest rates and quantitative easing programme unchanged Thursday, following the somewhat disappointing easing measures enacted at its previous meeting in December. Then, the central bank cut its deposit rate by 10 basis points, deeper into negative territory, to -0.30%, a reduction at the lower end of the 10 to 20 basis point cut economists had forecast.

Analysts said the ECB is likely to keep everything on hold at Thursday's meeting and will instead allow the easing measures put in place in December to feed through before implementing more.

"Today's decision is not likely to bring any more stimulus or changes to rates after December saw [ECB President] Mario Draghi throw everything but the kitchen sink at the economy," said James Hughes, chief market analyst at GKFX Financial Services.

"The overall issue for Europe is still the ultra-low inflation number, and currently none of the measures put in place by the ECB have worked to drive this higher. What we will want to see from the press conference today will be some clarity on what is working and what isn't and also what the recent moves in oil and China mean for monetary policy in the Eurozone," Hughes added.

The ECB will announce its policy decision at 1245 GMT, and Draghi will host a press conference at 1330 GMT.

The FTSE 100 index traded up 0.4% at 5,696.28 points, taking back a little of Wednesday's 3.5% sell-off. The FTSE 250 was up 0.1% at 15,652.83, and the AIM All-Share was flat at 674.28. European stocks also were higher, with the CAC 40 in Paris up 0.5% and the DAX 30 in Frankfurt up 0.6%.

However, Wall Street was called lower ahead of the open. Futures pointed the S&P 500 and Nasdaq 100 down 0.5% and the Dow Jones Industrial Average down 0.6%.

The stock-market gains in Europe look vulnerable as oil prices continue their volatile course. Brent oil has failed to substantially recover from the 12-year low hit on Wednesday of USD27.08 a barrel. At midday it was quoted at USD27.66.

"As ever, the feeling is that wherever crude prices move, the indices will follow given a relationship which seems to be stronger than ever. The issue here is one of confidence and, unfortunately, the only confidence that seems to be evident is that of traders who believe both crude prices and subsequently the FTSE 100 will go down," said Joshua Mahony, market analyst at IG.

Oil prices will be closely watched again at 1600 GMT, when the US Energy Information Administration releases a report on its crude oil stocks. In the remainder of the economic calendar Thursday, US initial and continuing jobless claims are at 1330 GMT as is Philadelphia Federal Reserve manufacturing survey. Eurozone consumer confidence is at 1500 GMT.

Pearson, up 15%, was the star performer in the FTSE 100. The education publisher said it will miss its previous guidance for calendar 2015 as it outlined plans to cut 4,000 jobs and simplify its business. However, the company edged up its dividend and pledged to maintain it at the new level.

Pearson now expects to report adjusted earnings per share of between 69 and 70 pence for 2015, falling short of its previous guidance of the lower end of a range of 70p to 75p.

The company also outlined guidance for 2016, saying it expects to report adjusted earnings per share before restructuring costs of between GBP580 million and GBP620 million, down from the approximately GBP720 million it is now guiding for 2015, and earnings per share of between 50 and 55 pence.

The company's shares had their lowest level since July 2009 on Wednesday at 644.50 pence but had rebounded to 754.00p by midday Thursday.

Royal Mail also was amongst the best performers in the FTSE 100, up 3.3%. The postal operator said its revenue edged higher in the first nine months of its financial year, helped by a strong performance from its GLS logistics business and a continued pattern in the UK of revenue shrinking from letters but growing from parcels.

Royal Mail said group revenue for the nine months to December 27 was up 1.0%. Its UK revenue was down 1.0% overall, with a 1.0% rise in parcel revenue offset by a 2.0% fall in letters revenue. Revenue was helped by a strong performance in from its GLS logistics business, which saw revenue rise 10%.

Catering services and outsourcing company Compass Group, down 3.9% and energy company SSE, down 3.3%, were the worst performers in the FTSE 100 after the stocks went ex-dividend, meaning new buyers no longer qualify for the latest dividend payout. Electra Private Equity, down 4.4% was one of the worst performers in the FTSE 250 after going ex-dividend.

N Brown Group was the biggest mid-cap gainer, up 14%, after the online, catalogue and stores retailer reported growth in revenue in the third quarter of its financial year, driven particularly by its three 'Power Brands' and over the cyber weekend in November.

The company, which trades under multiple brands including House of Bath, SimplyBe, Jacamo, and figleaves.com, said group revenue in the 18 weeks to January 2 grew 4.1% on the same period the year before, with like-for-like sales also growing 4.1%.

Bicycles and car parts retailer Halfords Group traded up 9.5%. The company reported growth in revenue in the third quarter of its financial year, boosted by a strong performance at its autocentres, a return to like-for-like growth in cycling, and a record day for sales over the Black Friday weekend.

Halfords said total group revenue in the 15 weeks to January 15 grew 0.4% year-on-year, as 4.1% growth in autocentres offset a 0.3% decline in retail. In the 41 weeks to the same date, total group revenue rose 1.3% as autocentres increased 4.4% and retail was up 0.8%.

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

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