FTSE in the blue after volatile session

Fri, 10th May 2013

The top share index in the UK ended the penultimate session of the week in the blue after a rate cut from the ECB, comments from the President Mario Draghi and better than expected economic data from the US saw it swinging throughout the day. By the close of trade the FTSE 100 was higher by 0.15 per cent, reaching 6460.

The European Central Bank has been under pressure to slash its primary refinancing rate for some time and this week's meeting was widely expected to finally succumb. It was therefore no surprise when the ECB announced that it would be reducing the figure from 0.75 to a new all-time low, 0.50 per cent. Whilst the move was welcomed by many, some felt the measure was not drastic enough to reverse the negative data which has been coming out of the eurozone and would have little real impact. In trade, experts predicted little impact on share prices as many had already factored in the reduction.

However, in his statement to the media, President Mario Draghi said that the ECB would also be prepared to consider a negative deposit rate; a move which would mean banks would effectively have to pay in order to leave funds. This move would be intended to boost lending and encourage banks to be less cautious.

Also impacting on trade was news from the US that the initial jobless figures were better than predicted. A fall of 18,000 was reported, resulting in a figure of 318,000 the lowest level seen since January 2008.

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