17th Oct 2014 09:39
LONDON (Alliance News) - Shares across Europe have rallied Friday morning, after some central bank members expressed a more doveish tone, while FTSE 100-listed Rolls Royce fell heavily after downgrading its short-term guidance for a second time this year.
The FTSE 100 is up 1.2% to 6,267.77, the FTSE 250 is up 1.8% to 14,734.54 and the AIM All-Share index is up 1.4%. to 685.39. In Europe, the CAC 40 in Paris is up 2.0%, and the DAX in Frankfurt up 2.1%.
The rally follows a week of turmoil in the markets, marked by sharp swings in equity indices, big falls in the oil price, and volatility in gold and bond prices, driven by fears that the global economy was worsening just as central banks turn off the supply of cheap money and start considering when to raise interest rates. Now, central banker comments suggesting interest rate rises may be delayed are behind the rally.
Bank of England economist Andrew Haldane said UK interest rates could remain at a record low for a longer period than he expected three months ago. If there is a genuine uncertainty about the path of the economy, the optimal policy response may be to avoid the worst outcomes, he told local business leaders in Kenilworth, Friday.
"While still a close run thing, the statistics now appear to favour the back foot," Haldane said. "Put in rather plainer English, I am gloomier."
Haldane's doveish remarks come after St Louis Federal Reserve Bank President James Bullard said in an interview with Bloomberg News that the Fed should consider delaying the end of its asset purchase program to halt the decline in inflation expectations. The comments add to the anticipation ahead of Fed Chair Janet Yellen's speech in Boston at 1330 BST.
Rolls Royce is the worst performing stock in London's blue-chip index, falling 12%. The company said it now expects underlying revenue this year to be lower and its outlook for 2015 has become more challenging. The engineering company said it expects underlying revenue for the full year to be 3.5% to 4% lower, compared with previous guidance of flat revenue against the comparable year. This includes adverse foreign exchange translation for the group estimated at GBP500 million, the same as it has previously announced.
Tullow Oil is the best performing stock in the FTSE 100, rising 5.5%. Societe Generale has upgraded the company to Buy from Hold, saying it has the ability continue financing high-margin production growth projects in Ghana and West Africa, despite the multi-year low oil price.
Petrofac is another notable gainer in the FTSE 100, with its shares rising 4.0%. The company said it has received record awards for its engineering, construction, operations and management activities as it remains on track to hit profit targets for the 2014. The company reported an order intake totalling USD9.4 billion for the year to date for its engineering, construction, operations and management (ECOM) sector.
The remaining economic data will come from the US, with September housing starts and building permits data due at 1330 BST. The US Reuters/Michigan consumer sentiment index for October will be released at 1455 BST.
Futures indicate a higher open on Wall Street. The DJIA is pointed 1.1% higher, and the S&P 500 and Nasdaq Composite are both indicated up 1.0%.
By Neil Thakrar; [email protected]
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