MARKET COMMENT: UK Stocks Drift Higher As Investors Await ECB Move

LONDON (Alliance News) - London stock indices drifted higher Monday, on a day of light trading volumes with US markets closed, as investors eagerly await stimulus measures from the European Central Bank later in the week.

The FTSE 100 closed up 0.5% at 6,585.53, the FTSE 250 up 0.9% at 16,067.19, and the AIM All-Share index up 0.2% to 697.55.

In mainland Europe, the French CAC 40 closed up 0.4%, and the German DAX 30 ended up 0.7% at 10,242.35, a new record high for the index.

US stock markets are closed to celebrate Martin Luther King Jr Day.

The ECB holds its first policy meeting of 2015 on Thursday with many in the market expecting President Mario Draghi to announce a broadening of stimulus measures to include buying sovereign debt to add liquidity to the eurozone economy. An advisor to the European Court of Justice last week cleared the way for Draghi to launch a government bond-buying programme, a prospect which also is thought to be behind the Swiss National Bank's surprise decision on Thursday last week to drop its currency peg for the franc against the euro.

A Société Générale survey of 176 investors found almost 70% of the sample expect the European Central Bank to announce a sovereign bond purchases programme in January. "The bulk of the market expects a program of EUR500 billion but the distribution is quite right skewed with another peak at EUR1 trillion. A significant minority expects the ECB to cut its main refinancing rate in January or in the following months," said SocGen analyst Sébastien Galy.

The Danish Central Bank on Monday cut both its lending and deposit rates by 15 basis points to 0.05% and -0.2% respectively, in an attempt to continue the Danish krone's own peg with the euro.

Before the cut, SocGen analyst Kit Juckes said the Danish currency is not likely to follow in the footsteps of the Swiss franc.

"We are doubtful that the Danish krone peg, which has existed for decades, is about to break," Juckes said. "Unlike the CHF, the DKK is not generally regarded as a global safe haven currency. Danish foreign reserves have actually declined by some 13% from their peak in mid-2012 after the passing of the European sovereign crisis, which implies a weakening of the pressure on DKK in recent years."

In China on Monday, the Shanghai Composite closed 7.7% lower after the country's securities regulator imposed margin trading curbs on three major brokerages, a sign that authorities are making efforts to keep investor enthusiasm in check after big gains last year. In Hong Kong, the Hang Seng index closed down 1.5%.

Shares in London-listed JP Morgan Chinese Investment Trust closed down 3.5% and Fidelity China Special Situations fell 3.9%, the second worst performer in the FTSE 250.

Travis Perkins, up 3.8%, was one of the best performers in the FTSE 100 after JP Morgan raised the building merchant and home improvement retailer to Overweight from Neutral. BP, down 1.1%, was amongst the worst blue-chip performers after JP Morgan cut it to Underweight from Neutral.

Infrastructure investor John Laing Group became the highest-profile proposed new London listing so far in 2015, saying it hopes to raise GBP130 million when it re-lists. The company was taken private by Henderson Group in 2007, and has since then spun off John Laing Infrastructure Fund and John Laing Environmental Assets into London-listed vehicles. It now wants to raise money of its own to further expand its remaining business, which is focused on public sector building through public-private partnership schemes as well as renewable energy schemes.

In the economic calendar Tuesday, Chinese gross domestic product and industrial production data are due at 0200 GMT. ZEW economic sentiment surveys for the eurozone and Germany will be released at 1000 GMT.

In the corporate calendar Tuesday, FTSE 100-listed miner Rio Tinto will issue a fourth-quarter production report, while fellow blue-chip miner BHP Billiton will release its December quarter operational review. Anglo-Dutch consumer goods giant Unilever will report full-year results.

Branded spirits producer Stock Spirits Group and bookmaker William Hill will release trading statements, and online financial markets trading company IG Group will be report half-year results.

IG Group said last week that it suffered losses of up to GBP30 million from the Swiss central bank's removal of the Swiss franc's ceiling against the euro, with its ability to recover client debts expected to play a part in exactly how much is lost.

By Neil Thakrar; neilthakrar@alliancenews.com

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