2nd Oct 2014 16:06
LONDON (Alliance News) - The FTSE 100 suffered a fourth consecutive day of losses to end Thursday at its lowest level in nearly eight months as the European Central Bank made no changes to any of its interest rate levels and outlined its asset-backed securities programme.
The FTSE 100 closed down 1.7% at 6,446.39. The FTSE 250, meanwhile, closed the day at its lowest level of the year, falling 1.4% to 15,005.19, with the AIM All-Share following suit, also closing at its lowest level of the year, down 0.7% at 738.45.
ECB President Mario Draghi said that the central bank would start purchasing covered bonds and asset-backed securities in the fourth quarter, starting with covered bonds in the second-half of October. The bank, however, surprised investors by saying that it will purchase senior tranches with credit assessments of at least BBB-, which includes Greek and Cypriot assets. Draghi also reiterated that the ECB Governing Council is unanimous in its commitment to use additional unconventional instruments within its mandate, if deemed necessary, to further address risks of too prolonged a period of low inflation.
"The market clearly have a disdain for any policy’s effectiveness apart from a quantitative easing programme and thus today’s subsequent sell-off is not surprising. Until there are any signs that these programmes work, markets are unlikely to be overwhelmed by their implementation," said Joshua Mahony, an analyst at Alpari.
European equity markets suffered as well from the ECB's announcement; the French CAC 40 closed 2.6% lower and the German DAX closed down 1.8%.
US indices have followed the European lead and are trading lower at the London close. The DJIA is down 0.5%, the S&P 500 is down 0.6% and the Nasdaq Composite is also down 0.6%.
BG Group was amongst the biggest fallers in the FTSE 100, with its shares declining 3.6%. The company confirmed that it has withdrawn from the block 3 drilling programme in Tanzania, for which it was operator. As a result, FTSE 250-listed Ophir Energy said it will increase its interest from 20% to 80% in the block and will become the operator of the license, while Pavilion Energy will retain its original 20%. Before withdrawing, BG Group had a 60% interest and was the operator of the license. BG shares were also dragged down by the price of oil which hit USD91.53 a barrel, its lowest level since June 2012.
Ophir Energy said separately Thursday that it has discovered 1.03 trillion cubic feet of gas in the Kamba and Fulusi prospects from its Kamba-1 well in Tanzania. Shares in the company closed 0.3% higher after spending much of afternoon trading amongst the top performing FTSE 250 stocks.
Hargreaves Lansdown was the biggest of the six gainers in FTSE 100. The company received an upgrade to Buy from Add by Numis, which says that the company has the ability to fend off new competition into the do-it-yourself investment market. The brokerage also highlighted changes in the UK pension market will also give the company a boost.
William Morrison Supermarket continued to fuel the ongoing price war between UK grocers. The company became the first of the UK's four big supermarkets to start matching prices with upcoming German discount grocers Aldi and Lidl, as it launched its new price match and points card - 'Match & More.' The company will provide a price-match guarantee against its bigger rivals Tesco, J Sainsbury and Wal-Mart-owned Asda, as well as the German discounters, which have been scooping up sales and market share from the UK's big four.
Morrison shares closed the day 0.6% lower while Tesco shares fell 1.1% Sainsbury's was the worst performing stock in the blue-chip index, declining 3.9%.
The main economic focus for Friday will be the US non-farm payroll data for September to be released at 1330 BST. The figure is expected to come in at 215,000, up from August's print of 142,000. US unemployment rate for September will be released simultaneously, while ISM non-munfacturing PMI for the same month will be released at 1500 BST.
Also being released Friday will be Markit services PMI data for September from a host of European countries, the UK and Japan.
The corporate calendar is quite light on Friday with a trading statement from FTSE 100-listed airline easyJet and an interim management statement from FTSE 250-listed Dunelm Group.
By Neil Thakrar; [email protected]
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