LONDON MARKET MIDDAY: UK Stocks Soft Ahead Of ECB Meeting, US Earnings

LONDON (Alliance News) - London shares were slightly lower Thursday midday, with investors focused on the European Central Bank monetary policy decision due at 1245 BST, while stocks in New York were called higher, as the US earnings seasons continues with updates from Microsoft and Alphabet, aka Google.

The FTSE 100 index was down 0.1% at 6,343.42 points, the FTSE 250 was down 0.6% at 16,932.36, and the AIM All-Share was off 0.1% at 743.92. In Europe, shares were mixed, with the French CAC 40 down 0.1% and the German DAX 30 up 0.2%.

"A steady battle of attrition continues in London, with the [FTSE 100] index still unable to establish a direction after four days of relentless grind," said IG senior market analyst Chris Beauchamp. "However, at least today we have a real reason for not moving too far – namely the ECB meeting."

The ECB's monetary policy decision is followed by a press conference with President Mario Draghi at 1330 BST in Malta, where the ECB policy meeting was held. The central bank is largely expected to leave interest rates on hold but to open the door to further monetary action amid the threat of deflation and a slowdown in major emerging economies.

Last month's 0.1% fall in annual eurozone inflation along with cooling growth in economies such as China, Brazil and Russia has increased the pressure on the ECB to extend its EUR60 billion a month bond-buying plan under its quantitative easing programme.

Joost van Leenders, chief economist at BNP Paribas, does not expect any action during Thursday's meeting. However, Leenders said that, with euro-zone inflation still far below the central bank's target of "below, but close to, 2%", Draghi may strike a dovish tone.

"He may still need some time to assess the impact of foreign weakness on the eurozone economy, but he will most likely express readiness to do more if needed," van Leenders said. "That may include adjusting the current programme of quantitative easing. We think the ECB will extend this programme beyond September 2016, and we expect such an announcement in December."

In the US, the earnings season continues with third-quarter results from technology companies Microsoft, AT&T and Alphabet, the company created by Google to hold the internet giant's businesses beyond its search engine. All are expected to be released after the US market close Thursday.

US stocks were called for a positive open, with the DJIA pointed up 0.3% and the S&P 500 and the Nasdaq 100 both seen up 0.4%. Wall Street ended lower Wednesday, with the Dow 30 down 0.3%, the S&P 500 down 0.6% and the Nasdaq Composite down 0.8%.

In the US economic calendar, initial and continuing jobless claims are due at 1330 BST. At 1500 BST there are US existing home sales and housing price index along with US Conference Board leading indicator and eurozone consumer confidence.

In the UK, the pound rose after UK retail sales were reported to have climbed at a faster-than-expected pace in September, driven mainly by falling in-store prices and promotions around the Rugby World Cup, held in the UK.

Data from the Office for National Statistics showed that retail sales including automotive fuel grew 1.9% month-on-month in September, exceeding economists' expectations for a 0.3% rise. Excluding auto fuel, retail sales rose 1.7% monthly in September, faster than the 0.3% climb expected by economists.

"The improvement in retail sales in the third quarter bolsters the view that UK domestic demand is continuing to improve despite risks abroad," said Kallum Pickering, senior UK economist at Berenberg.

Sterling spiked following the data, but had already lost most of those gains by midday. The pound rose from to an intraday high of USD1.5509, standing at USD1.5463 at midday.

On the London Stock Exchange, Travis Perkins was the worst blue-chip performer, down 5.3%, after it said its 2015 earnings are set to come in at the low end of market expectations due to continued challenges in its key markets in the third quarter

The blue-chip builders' merchant and home improvement retailer said that despite planning for a reduction in repair, maintenance and improvement markets over the summer months, the actual slowdown in the market was worse than had originally been expected.

Despite continuing to outperform a weak UK market, the tougher-than-expected conditions mean the group now anticipates its full-year 2015 earnings before interest and taxation will be at the low end of market expectations.

Fellow building-products company SIG was the biggest faller in the FTSE 250, down 23%. It said its sales performance has diverged in the first nine months between its UK and European operations and said continued weakness in the latter, plus some softness in the UK repair, maintenance and improvement market, mean it now expects its underlying pretax profit to fall year-on-year.

SIG said it now expects its underlying pretax profit for the year to the end of December to be GBP85 million to GBP90 million, compared to GBP98.1 million in 2014. The underlying figures strip out any exceptional items and the effects of acquisitions and disposals.

Other building materials companies were hit by the comments by their two peers. Grafton Group was down 3.6%, and Howden Joinery Group lost 4.5%.

Elsewhere, Ashtead Group was up 2.3% after shares in the industrial equipment rental company were boosted by better-than-expected third quarter results from US peer United Rentals.

GKN was up 1.6%. The engineer said its sales in the first nine months edged higher, but also noted that its trading environment has shown signs of softening in the final quarter of the year.

Among gainers in the mid-cap index, Ladbrokes was the best performer, up 7.1%, after analysts considered the betting company's results "poor", but in line with expectations.

Ladbrokes said group net revenue fell in the third quarter of 2015 as it faced a tough comparative period, and it reported a decline in earnings due to increased games duty and taxes. The group said its proposed merger with Gala Coral is on track.

Davy Research said investors should focus on the merger, rather than on Ladbrokes' quarterly results.

"In reality, as long as trading remains broadly in line with expectations between now and merger completion, we do not see trading [key performance indicators] driving the equity story here," said Davy, referring to KPIs such as revenue.

Zoopla Property Group was up 5.6%. The online property portal said it expects revenue and its adjusted earnings before interest, taxation, depreciation and amortisation to grow for the year to the end of September and said it is seeing encouraging trends in its markets.

Shares in Debenhams were up 4.9% after the department store operator reported growth in profit in its recently-ended financial year as it announced that Chief Executive Michael Sharp will step down from his role in 2016.

Debenhams posted a 7.3% rise in pretax profit in the year ended August 29 to GBP113.5 million from GBP105.8 million the year before, in line with market expectations. Revenue grew slightly to GBP2.32 billion from GBP2.31 billion, as like-for-like sales increased 0.6%. Debenhams will pay a final dividend of 2.4 pence, maintaining its full-year dividend at 3.4p.

On AIM, Parallel Media Group was up 21%. The event marketing and media agency said its music division has secured the underwriting for the Japan concerts to be performed by an unnamed "US pop songstress" in December. The revenue generated from the deal, though not specifically defined, will be higher than the operating costs and VAT and will mean Parallel will secure some revenue from the deal.

Lombard Risk Management was down 13%. The financial services software provider said it swung to a loss in the first half of it financial year, as it booked higher administrative expenses and charges for depreciation, amortisation and impairment.

By Daniel Ruiz; danielruiz@alliancenews.com

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