(Alliance News) - Stock prices in Europe had a spring in their step midday Thursday, as investors cheered the Bank of England boosting quantitative easing and grew more confident of stimulus measures in the US, as Democratic challenger Joe Biden edged closer to the presidency.
"Stock markets continue to take the US election in a positive frame of mind, and with the BoE throwing more QE into the fray, the second central bank to do so in a week, the outlook for stocks continues to brighten," IG Chief Market Analyst Chris Beauchamp said, referencing Australia's central bank, which ramped up its huge bond-buying programme on Tuesday.
The FTSE 100 index of London large-cap stocks was up 22.83 points, or 0.4% at 5,906.09.
The FTSE 250 rose 95.42 points, or 0.5%, at 17,891.50. The AIM All-Share was up 3.38 points, 0.4%, at 978.12.
The Cboe UK 100 index was up 0.5% at 586.79. The Cboe 250 was up 0.7% at 15,058.90. The Cboe Small Companies lost 0.3% at 9,595.68.
The CAC 40 stock index in Paris was up 1.1% in the early afternoon Wednesday, and Frankfurt's DAX 30 was up 1.5%.
The UK central bank on Thursday kept the Bank Rate at 0.1%, as expected, but upped QE by GBP150 billion, a bit more than anticipated, taking its total stock of UK government bond purchases to GBP875 billion.
The pound was quoted at USD1.3073 midday on Thursday, improved from USD1.2977 on Wednesday evening, mostly as the dollar gave up ground against major rivals.
"Since the committee's previous meeting, there has been a rapid rise in rates of Covid infection. The UK government and devolved administrations have responded by increasing the severity of Covid restrictions. All restrictions announced up to and including October 31 have been reflected in the committee's judgements," BoE said.
The central bank now expects to see a decline in the UK's gross domestic product during the fourth quarter but tips household spending and GDP to increase early in 2021 as Covid-19 restrictions ease.
"The BoE's outlook for the UK economy is understandably grim, prompting the move towards more QE, but as in the US the real boost will come from fiscal stimulus, and at least here there is some good news thanks to the chancellor's decision to extend furlough. The costs of the virus continue to mount at an astonishing speed, but given the alternative markets have decided they are the lesser of two evils," IG's Beauchamp added.
A similarly drab economic forecast came from the EU on Thursday, as a second wave of the coronavirus pandemic has stalled a nascent recovery in Europe. The EU warned the economy would not return to pre-virus normality before 2023.
In its latest forecast, the European Commission said the eurozone economy would expand by just 4.2% next year, much lower than the 6.1% it predicted in July.
The euro was up at USD1.1811 from USD1.1710 at the European market close on Wednesday, amid the dollar weakness.
The US presidential election remains undecided. Joe Biden won the battleground prizes of Michigan and Wisconsin on Wednesday, reclaiming a key part of the "blue wall" that slipped away from Democrats four years ago and leaving the challenger better placed to seal the presidency.
Incumbent Donald Trump however, has requested recounts in several states and threatened legal action.
In New York, US futures were higher. The Dow Jones Industrial Average and S&P 500 are called up 1.5% and 2.0%, respectively. The duo were again expected to be outperformed by the Nasdaq Composite; the tech-heavy index is called up 2.9%.
Versus the Japanese yen, the dollar was at JPY104.13, down from JPY104.49 at the London market close on Wednesday.
On the London Stock Exchange, gold miners Polymetal International and Fresnillo were 3.3% and 2.6% higher, respectively.
The yellow metal fetched USD1,919.82 an ounce midday Thursday, up from USD1,901.50 late Wednesday.
"Speaking of gold, it too has found decent support after the likely outcome of US presidential election — that is, a Biden victory and a split legislature — has raised speculation that conditions in the world's largest economy will remain supportive for all sorts of asset prices, including gold," said ThinkMarkets analyst Fawad Razaqzada.
"Investors are betting that a potential Biden win will pave the way for a bigger fiscal stimulus package than would have been the case if Trump was re-elected, while a Republican-controlled senate will make it unlikely that Trump's corporate tax cuts will be rolled back."
At the other end of the large caps, AVEVA gave back 8.4%.
The information technology firm reported a loss for the first half of its financial year, as revenue declined considerably.
It posted a pretax loss of GBP24.2 million, swinging from a profit of GBP24.0 million a year before. Revenue declined by 15% year-on-year to GBP332.6 million from GBP391.9 million.
Supermarket chain Sainsbury's sat towards the bottom of the FTSE 100, down 4.7%. It sunk to a GBP137 million interim pretax loss, from a GBP9 million profit a year earlier. The company was hit by a bruising GBP438 million in one-off costs.
Group sales, excluding VAT but including fuel, inched 1.1% lower to GBP14.93 billion from GBP15.10 billion. Like-for-like sales excluding fuel jumped 6.9% annually, however.
Looking ahead, the company said it will close around 420 Argos standalone stores, reducing the standalone estate to just 100 by March 2024. However, it will open 150 more Argos stores in Sainsbury's supermarkets by the target date, as well as 150 to 200 more Argos collection points in supermarkets and convenience stores.
Sainsbury confirmed that as part of its cost-cutting plans, "around 3,500" jobs could be lost. This is higher than the 3,000 job cuts reported by UK media outlets ahead of Thursday's results announcement.
The company declared 3.2 pence per share interim dividend, down 3% from a year ago. The supermarket, which did not pay a final dividend due to Covid-19, declared a special payout of 7.3p, in lieu
"The restoration of dividend payments at Sainsbury is not boosting the share price, presumably because investors are of the view that Chief Executive Simon Roberts' efforts to explain away up to GBP1 billion of restructuring costs over the next three years as 'one-off' items are as futile as the Bank of England's attempt to boost the economy with an extra GBP150 billion of quantitative easing," said AJ Bell Investment Director Russ Mould.
"Nevertheless, Sainsbury is speaking loudly and clearly to one class of portfolio builder, namely the income-seeker, as it is now the fifteenth FTSE 100 firm, and the sixty-fifth in all, to either resume or announce a plan to resume dividend payments."
Elsewhere in London, a host of retailers updated on their plans as the England entered a month-long lockdown.
Homewares retailer Dunelm lost 0.4%. Its 145 stores in England have closed for the one-month lockdown, though continue to operate click and collect services. Its nine Welsh stores will lift shutters on Monday, as restrictions there ease.
The company complained that its business was not spared from the November lockdown in England. "The latest legislation announced in England relating to Covid-19 restrictions does not include 'homewares' on the list of permitted retail businesses. This is both unexpected and inconsistent with the guidance provided during the previous national lockdown, when homewares was added to the essential retail list in May," it said.
Elsewhere, furniture retailer DFS lost 1.5% but said it will largely shake off the curbs in England. All stores will close but the measures are "not expected to materially impact profitability".
Ramsdens Holdings, a retailer and financial services provider, jumped 7.7% as it noted that its services are deemed as essential. All 85 stores in England will operate, like its 19 sites in Wales did during the "firebreak" lockdown there.
In Westminster, Chancellor Rishi Sunak is expected to outline further support to see the UK economy through the restrictions, when he makes a statement later on Thursday.
He has already extended the furlough scheme through November due to the second lockdown and is expected to announce the support will remain in place for areas still in Tier 3 restrictions through December.
At midday on Thursday, Brent oil fetched USD40.99, up from USD40.62.
Still to come on Thursday, the weekly US initial jobless claims are out at 1330 GMT. And in the second of a pair of major central bank meetings, the Federal Open Market Committee will announce its interest rate decision at 1900 GMT. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 GMT.
By Eric Cunha; ericcunha@alliancenews.com
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Ramsdens Hldgs (RFX)
Dunelm (DNLM)
Dfs Furn (DFS)
Fresnillo (FRES)
Sainsbury's (SBRY)