21st Jan 2016 17:00
LONDON (Alliance News) - After a bruising sell-off on Wednesday, stock markets were soothed Thursday by European Central Bank President Mario Draghi's hint of more stimulus measures from the bank's next policy meeting in March.
In his press conference after the ECB kept all key interest rate unchanged, Draghi said there was "no limit" on what policy tools the bank can deploy to achieve its inflation goal and to boost euro area growth. He hinted more stimulus measures may come in March as the downside risks such as global uncertainty, market volatility and geopolitics have increased.
Draghi said the downside risks have increased since the year began, amid heightened uncertainty about emerging market economies' growth prospects, volatility in financial and commodity markets, and geopolitical risks. Further, he said euro area inflation dynamics continue to be weaker than expected.
"It will therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early March, when the new staff macroeconomic projections become available which will also cover the year 2018," Draghi said in his introductory remarks in Frankfurt.
Responding to reporters' questions, Draghi said the bank has several policy tools at its disposal and there was "no limit" as to what it can do in achieving its inflation and growth objectives. He also said that the ECB was willing and determined to use its policy tools when needed.
The remarks echoed Draghi's famous comment in 2012 that "the ECB is ready to do whatever it takes to preserve the euro.
And believe me, it will be enough."
Craig Erlam, senior market analyst at Oanda, said Draghi's statement was always likely to be dovish amid the recent market turmoil but the extent of his dovishness was a surprise.
"I don't think people anticipated such a blatant and clear warning of a monetary policy response at the next meeting, when new macro-economic projections will assist policy makers in determining the appropriate response," Erlam said.
The Oanda analyst highlighted similar anticipation for stimulus ahead of the ECB's December meeting, when the central bank disappointed market expectations with its easing measures.
"While I doubt they’ll make the same mistake again, we should perhaps be careful not to expect too much from the central bank again. There was and remains some very influential and hawkish members within the central bank, something Draghi appears to sometimes forget when placed in front of the cameras," Erlam added.
The euro tanked as Draghi spoke to a low of USD1.0776 against the dollar. At the London close, the euro was quoted at USD1.0828, compared to USD1.0912 at the close Wednesday.
The pound traded the dollar at USD1.4180 at the close, compared to USD1.4210 on Wednesday.
In London, the FTSE 100 index closed up 1.8% at 5,773.79 points, the FTSE 250 up 1.2% at 15,833.56 and the AIM All-Share up 0.4% at 677.28.
In Europe the French CAC 40 ended up 2.0% and the German DAX 30 rose 1.9%.
On Wall Street at the London close, the Dow Jones Industrial Average traded up 0.8%, the S&P 500 was up 0.7% and the Nasdaq Composite up 0.5%.
Oil prices remained a threat to the stock market rebound, but the commodity traded much higher, with Brent rising back above the USD28 a barrel mark. At the London equities close, Brent was quoted at USD28.85 a barrel, compared to USD27.62 on Wednesday.
The moves came despite a report from the US Energy Information Administration that its crude oil stocks rose by nearly 4.0 million barrels in the week ending January 15, above of expectations for a 2.8 million barrel rise.
Gold prices slipped on Thursday. The metal was quoted at USD1,094.40 an ounce at the close versus USD1,102.90 on Wednesday.
Pearson was a top blue-chip performer throughout the day, ending up 11%. The education and publishing company tabled extensive restructuring plans and pledged to maintain its dividend, news investors welcomed with open arms as the group also said it will fall short of its guidance for 2015.
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.
Pearson will slash 4,000 jobs, or around 10% of its workforce. It is moving quickly to implement the restructuring, at an estimated cost of around GBP320 million, in an effort to complete the majority of it by midway through 2016.
Royal Mail also ended amongst the best performers in the FTSE 100, up 3.4%. 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%.
N Brown Group was the best mid-cap performer, closing up 13% 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%.
Halfords Group added 13%, after the automotive parts retailer's cycling division returned to growth in its financial third quarter, having suffered a difficult few months in the earlier part of the year.
In the 15 weeks to January 15, Halfords said the cycling division achieved 1.1% like-for-like sales growth, after suffering declines in the preceding couple of quarters.
In the economic calendar for Friday, the Nikkei manufacturing purchasing managers' index reading for Japan is at 0135 GMT just before the MNI business sentiment indicator for China at 0145 GMT. The ECB's Draghi will be speaking in Davos at the World Economic Forum at 0745 GMT.
There are then a series of flash Markit manufacturing, services and composite PMI readings from Europe. France is at 0800 GMT, Germany at 0830 GMT and the eurozone at 0900 GMT. This is followed by UK retail sales and public sector net borrowing at 0930 GMT.
The Chicago Fed national activity index is at 1330 GMT, before flash US Markit manufacturing PMI at 1445 GMT, and existing home sales at 1500 GMT. The Baker Hughes US oil rig count is at 1800 GMT, after the close of European stock markets.
In the UK corporate calendar, there are trading statements from real estate investment firm Workspace Group, IT services company Computacenter, financial services company Close Brothers and technology tools and systems company Oxford Instruments.
By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1
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