6th Feb 2014 17:13
LONDON (Alliance News) - Global stocks indices rallied Thursday, with only a handful of FTSE 100 companies closing lower, as the UK and European Central Banks kept their monetary policies unchanged and US economic data continued to improve ahead of Fridays key jobs report.
The FTSE 100 has had its best day of the year by far, closing up 1.6% at 6,558.28, while the FTSE 250 closed up 1.5% at 15,789.91 and the AIM All-Share closed up 0.6% at 857.81.
European markets have also rallied, with the French CAC 40 up 1.7% and the German DAX up 1.5%, while on Wall Street, the DJIA, Nasdaq Composite and S&P500 were all up by 1% or more.
It's the second day of gains on the global equities markets after a five-day bout of heavy selling prompted by concerns over slowing growth in emerging markets. Sentiment has shifted towards the improving outlook in the US and Europe.
The Bank of England and European Central Bank both held interest rates and kept their policies unchanged, with ECB President Mario Draghi reiterating that he's not expecting the euro zone to slide into a period of damaging deflation.
Some market participants had forecast that the ECB might cut rates after eurozone inflation fell to 0.7% in January, from 0.8% in December. However, although Draghi said that although inflation will remain well below the bank's 2% target for a "protracted period", he added that there was no risk of deflation in the region.
Draghi also said that no action had been take at Thursday's meeting as the bank wanted to get a clearer picture of the state, and will be looking closely at next week's fourth-quarter eurozone GDP data.
"This seemed to suggest that we could get some action in March", said CMC Markets chief analyst Michael Hewson.
Economic data Thursday showed that UK house prices rose by 7.3% in the three months to the end of January, slightly slower than the 7.5% rise seen in the previous three months, according to the Halifax house price index. Economists had expected prices to have risen by 7.2%. In the month of January alone, prices rose by 1.1%, up from the 0.6% drop in December.
In the US, weekly jobless claims fell to 331,000 this week, from 351,000 last week, beating the expectation of a drop to 335,000. After rising last week, the improving data will add to hopes of a strong non-farm payroll figure on Friday. That data is considered the major monthly US jobs report.
The pound received a small morning boost from the UK house price data but the euro was the clear winner among the forex majors Thursday, racing up to a five-week high against the pound and a five-day high against the dollar in the wake of the ECB rate decision.
When the European equity markets closed, the euro was up at USD1.3600 and GBP0.8330. Against the dollar, the pound was trading slightly higher at USD1.6335.
Within UK equities, housebuilders benefited from the strong house price data, with the FTSE 350 sector index gaining 3.1%. Barratt Developments ended 4.1% higher, Bellway gained 4.3% and Persimmon gained 3.0%.
Telecoms and Technology stocks also did well, with Vodafone providing substantial support to the FTSE 100, closing as the top gaining stock, up 3.7%. It confirmed its full-year operating profit guidance, despite a 4.8% decline in revenues in its fiscal third quarter.
In the FTSE 250, Imagination Technologies was the biggest gainer by far, rocketing up 15%. The group said it had extended its multi-year, multi-use license agreement with the US's Apple Corp.
There had been concerns that Apple would begin to use its own designs or go to another supplier for the technology it licences from Imagination Technologies, but the announcement should "dispel investor concerns", said Jefferies analyst Lee Simpson. It's also the first public disclosure of Apple's use of video intellectual property from Imagination.
Only a handful of blue chip stocks closed lower, with Astrazeneca the biggest faller. The pharmaceutical company closed down 2.1% after saying its revenue and pretax profit fell in 2013 as it continued to be hit by the loss of exclusivity on several of its brands and increased competition from generics.
The corporate calendar looks a lot quieter Friday, with just FTSE Fledgling listed support group ACAL due to give an interim management statement.
There's plenty in the macro calendar however, with the US non-farm payroll report at 1330 GMT undoubtedly providing the focus. The expectation is for a 185,000 increase in jobs in January, from 74,000 the unexpectedly weak 74,000 added in December. The headline rate of unemployment of expected to be unchanged at 6.7%. With further cuts to the Federal Reserve asset buying program directly liked to domestic economic readings, the non-farm payrolls will be key.
Ahead of that, the HSBC China services PMI is released overnighting and may provide some early direction. UK industrial and manufacturing production numbers are due at 0930 GMT, followed by German industrial production at 1100 GMT.
By Jon Darby; [email protected]; @jondarby100
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