20th Nov 2015 12:05
LONDON (Alliance News) - Stocks in the UK were trading largely flat midday Friday as European Central Bank President Mario Draghi said the central bank is willing to use all measures within its mandate to reach its inflation goal.
"If we decide that the current trajectory of our policy is not sufficient to achieve our objective, we will do what we must to raise inflation as quickly as possible," Draghi told at the European Banking Congress in Frankfurt.
Although the bank's monetary policy measures have clearly worked to arrest the deflationary pressures in the euro area a year ago, Draghi said, the growth momentum still remains weak and inflation runs well below the target of below but close to 2%.
The ECB president reiterated that the Governing Council will thoroughly assess the factors that are slowing the return of inflation towards 2% at its December 3 meeting. The ECB will announce its policy decision at the conclusion of the meeting.
Brown Brothers Harriman said Draghi's comments signalled that the ECB will take aggressive action when it meets next month.
"His comments today are important," analysts at the private bank said. "They suggest that Draghi is pushing the ECB toward broad-based action" on both the central bank's bond-buying programme and interest rates.
"There are four moving parts: pace, duration, composition, and rates. What participants are contemplating now is not tweaking one or two of these, but all of them: Stepping up the pace of the purchases from the current EUR60 billion, to be extended beyond September 2016, including more agencies and possibly sub-sovereign instruments, and a cut in the deposit rate," BBH added.
Draghi's dovish speech saw the euro sink against other major currencies but there was a more muted reaction in stocks.
The euro was already under pressure before Draghi's speech after data published by Destatis showed Germany's producer prices declined at the fastest pace since early 2010. Producer prices decreased 2.3% in October from last year, the biggest fall since February 2010, when prices declined 3%. Producer prices have been falling since August 2013. Economists had forecast prices to fall 2% after easing 2.1% in September.
At midday, the euro recovered some of its losses and traded the dollar at USD1.0691.
In London, the FTSE 100 traded up 0.1% at 6,3303.98 points, the FTSE 250 was up 0.1% at 17,157.67 and the AIM All-Share was down 0.2% at 729.29.
In the only domestic data release of the day, UK public sector net borrowing increased unexpectedly in October, figures from the Office for National Statistics showed. The PSNB, excluding public sector banks, climbed to GBP8.2 billion in October from GBP7.1 billion in the same month last year. It was expected to narrow to GBP6.0 billion.
In Europe, the French CAC 40 was down 0.3%, while the DAX 30 was up 0.1%.
Ahead of the open on Wall Street futures were pointing higher. The Dow Industrials was pointed up 0.3%, while the S&P 500 and Nasdaq 100 were both indicated up 0.2%.
On the London Stock Exchange, Imperial Tobacco Group traded up 2.1%, one of the best performers in the FTSE 100. The Financial Times reported that British American Tobacco is understood to have put together a syndicate of investment banks to support a potential takeover of its fellow London-listed rival.
The FT Alphaville blog, citing people claiming to have direct knowledge of the process, said no approach had been made and no certainty one will, but BAT is understood to have corralled a syndicate of banks willing to back a possible offer. BAT shares were up 0.1%.
Diageo shares were up 1.1% after JP Morgan upgraded the drinks maker to Overweight from Neutral. The US bank said that after a challenging period, Diageo should be able to achieve mid-single digit top-line growth which, along with margin expansion, should lead to high single-digit organic earnings before interest and taxes growth by financial year 2017.
Outsourcing company G4S was under pressure after Credit Suisse downgraded its rating on stock to Neutral from Outperform and cut its target price to 250.00 pence from 320.00p. G4S shares were trading down 2.5% at 220.20p.
Poundland Group continued to recuperate some of Thursday's heavy losses and traded up 3.2%. The stock lost 20% on Thursday after the discount retailer revealed that current trading looks volatile, while analysts were concerned that the condition of the recently-acquired 99p Stores business is worse than expected.
On AIM, HaloSource traded down 34% after the clean water technology company warned it will post a net loss for 2015 higher than market expectations as a result of delays in some customer rollouts and some operational challenges.
It said operational challenges had arisen as it increased manufacturing capacity at its drinking water facility in China, which has temporarily hit its ability to fulfil customer orders and subsequently will reduce its revenue in this segment in the second half of 2015. HaloSource said that as a result its total revenue for 2015 will be "materially lower" than market expectations.
China New Energy was up 35% after it said it plans in December to enter into a non-binding memorandum of understanding with Sunbird Bioenergy Africa to develop a cassava to bioethanol plant in Zimbabwe.
The company said it plans to travel to Zimbabwe and attend the Forum on China-Africa Cooperation summit in Johannesburg in December, and will enter the MOU during this period. The company originally announced it would sign a new deal with its partner, Sunbird, for the venture in October.
Still ahead in the economic calendar, Federal Reserve Bank of St Louis President James Bullard speaks at 1400 GMT, the preliminary reading of eurozone consumer confidence for November is expected at 1500 GMT and the Federal Reserve Bank of Kansas City's manufacturing activity figure is released at 1600 GMT.
By Neil Thakrar; [email protected]; @NeilThakrar1
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