23rd Jan 2015 10:58
LONDON (Alliance News) - London markets are broadly positive Friday, adding to six sessions of gains as investors welcomed the European Central Bank's decision to add sovereign bond buying to its stimulus measures, with investor focus now shifting to Sunday's election in Greece.
The FTSE 100 is 0.2% higher at 6,811.07, the FTSE 250 is up 0.5% at 16,460.42 and the AIM All-Share index is down fractionally at 696.32.
ECB President Mario Draghi said Thursday the bank will start buying sovereign debt in March at a rate of EUR60 billion a month through September 2016 in a bid to revive 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 continues to lift stocks, and weigh on the euro. The euro is quoted at USD1.1230 early Friday, down from USD1.1620 before Thursday's announcement. The CAC-40 is 1.6% higher, shrugging off a slowdown in the country's private sector, and Germany's DAX is up 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."
"While the program has had the inevitable effect of pushing stock markets sharply higher and the euro off a cliff, it remains doubtful that this extra cash will make that much difference," Hewson adds. "Quite simply, the banking transmission mechanism in the euro area continues to remain impaired, and until that is fixed a lot of this cash is unlikely to trickle down to where it is needed."
After the ECB's move, focus in Europe now will be on Greece ahead of Sunday's snap election in the country after the Parliament failed in late December to agree on a new head of state. According to opinion polls, left-wing party Syriza is heading for a comfortable victory, and there are fears that Syriza-led coalition would try to renegotiate Greek debt and end austerity measures.
In economic releases Friday, the French manufacturing sector grew in January and the services sector shrank, according to an initial reading of a survey from Markit Economics. The country's composite output index fell to 49.5 in January from 49.7 in December. In Germany, private sector growth improved, with Markit's Composite Purchasing Managers' Index rising to to 52.6 in January from 52 in December, the strongest growth in three months.
Activity also improved across the European region; the euro area Composite PMI rose by more than expected to a five-month high of 52.2 in January from 51.4 in December. US Markit manufacturing PMIs are due at 1445 GMT.
UK retail sales increased unexpectedly in December, though at a slower rate than in November. Retail sales volume, including fuel, increased 0.4% on the month in December after a 1.6% rise in November, the Office for National Statistics said. Retail sales were expected to decline 0.6% and the news helped briefly lifted the weakened pound back above USD1.50. Sterling is now quoted at USD1.4977.
?A combination of Black Friday, disrupted deliveries and heavy discounts meant shoppers? usual Christmas spending habits were lower than normal," said Dennis de Jong at UFX.com. "However, today?s figures aren?t as bad as many predicted and retailers will take a crumb of comfort that there were still some signs of growth in what has been a testing time for the high street.?
In New York, the DJIA and S&P 500 are called to open flat to fractionally higher after both indices added 1.5% Thursday. The Nasdaq 100 is forecast to open a shade less than 0.1% higher.
US earnings Friday include Bank of New York-Mellon, General Electric, McDonald's and Honeywell, all scheduled to be released before US markets open.
In Asia, markets closed higher in the first session after the ECB action. Japan's Nikkei closed up 1.1% at 17,511.75 and the Hang Seng in Hong Kong closed up 1.3% at 24,850.45. The Shanghai Composite closed 0.3% higher at 3,351.764, weighed down by an HSBC manufacturing survey. The HSBC Manufacturing Purchasing Mangers' Index was 49.8 for January, up from 49.6 in December but still below 50, indicating contraction.
Brent crude is quoted at around USD49.40 a barrel early Friday, up from last week's low of USD45.16, and US benchmark West Texas Intermediate is quoted at USD46.95 a barrel. Prices rose in early trading on the news of the death of King Abdullah of Saudi Arabia, the largest oil producer in the Organization of Petroleum Exporting Countries.
"The announcement overnight of the death of the Saudi king has invited speculation about the possibility of a change in the current Saudi policy of allowing oil prices to fall to reach their natural level, with a sharp rally higher, but any change in policy seems unlikely," CMC's Hewson says.
Gold is hovering just under the psychologically important USD1,300 level passed Wednesday for the first time since last summer. Early Friday it is quoted at USD1,294.82 an ounce.
In UK corporate news, EnQuest shares were 28% higher after the company's lenders agreed to relax the covenants on its revolving loan facility in response to the recent oil price decline, which also prompted the company to further slash spending plans for 2015.
Premier Foods is up 8.7% after the said it expects full-year adjusted profit to be GBP77.1 million and trading profit in line with expectations at GBP131 million after an improvement of sales in December which saw it achieve its biggest quarterly market share in three years.
Shoe and accessories maker Jimmy Choo reported full-year revenue of GBP299.1 million, up 6.2%, and said Asia continues to be strong, sending shares up 3.6%.
By Ian Edmondson; [email protected]
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