23rd Jan 2015 07:03
LONDON (Alliance News) - London markets are set to trade higher Friday, building on six days of gains as investors digest the European Central Bank's confirmation of its long-anticipated intention to add sovereign bond buying to its stimulus measures.
The FTSE 100 is called to open 26 points higher at 6,821.4, up from a 1% gain Thursday.
ECB President Mario Draghi said the bank will start buying sovereign debt in March at a rate of EUR60 billion a day through September 2016 in a bid to boost the moribund European economy, a figure higher than expected. However, the bank also said it will continue until there is a "sustained adjustment in the path of inflation which is consistent with" the ECB's aim of achieving inflation rates below, but close to, 2% over the medium term, making the process effectively open-ended. The ECB's main interest rate was left unchanged at a record low of 0.05%.
The news lifted stocks, but weighed on the euro. The euro is quoted at USD1.1330 early Friday, down from USD1.1620 before Thursday's announcement. The CAC-40 ended 1.5% higher and Gemany's DAX closed up 1.3%. In New York, the DJIA and S&P 500 both added 1.5%.
"Having promised to do whatever it takes in 2012, the ECB has finally had to put its money where its mouth is, despite bond yields already being at record lows," says Michael Hewson at CMC. "The key question now is whether it will be enough."
In Asia, markets responded positively Friday. Japan's Nikkei closed up 1.1% at 17,511.75, lifted by the ECB actions. The Hang Seng in Hong Kong is up 1.2% at 24,809.43, and the Shanghai Composite is 0.2% higher at 3,348.379.611, weighed down by by HSBC manufacturing survey which indicated another contraction in producer prices in December. The HSBC Manufacturing Purchasing Mangers' Index was 49.8 for January, up from 49.6 in December but still in contraction.
French, German and euro zone services and manufacturing PMIs are due at 0800 GMT, 0830 GMT and 0900 GMT respectively. UK retail sales for December are due at 0930 GMT and US Markit manufacturing PMIs are due at 1445 GMT.
Brent crude is quoted at around USD49.28 a barrel Friday, up from last week's low of USD45.16, and US benchmark West Texas Intermediate is quoted at USD46.74 a barrel. Gold is hovering above the psychologically important USD1,300 level passed Wednesday for the first time since last summer. Early Friday it is quoted at USD1,296.46 an ounce.
In UK corporate news, Close Brothers and Premier Foods are giving trading statements.
US earnings include Bank of New York-Mellon, General Electric and Honeywell, all scheduled to be released before US markets open.
By Ian Edmondson; [email protected]
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