6th Mar 2014 17:19
LONDON (Alliance News) - The UK's main stock indices closed modestly higher Thursday, with life insurer Aviva leading the FTSE 100, while the pound lost ground against the euro after the single currency was given a boost when the European Central Bank President pledged to keep rates down and eased concerns about falling inflation.
As expected, the Bank of England kept its key interest rate unchanged at a historic-low of 0.50%, sticking with forward guidance and also maintaining its asset purchases at GBP375 billion a month. The decision means the UK is now entering it's sixth year under the ultra-loose monetary policy.
The ECB, meanwhile, retained its record-low 0.25% interest rate, and bank President Mario Draghi signaled it will be there for a long time even though the euro zone is starting to recover from its deep downturn.
The ECB wants "to maintain an accommodative monetary policy stance for as long as necessary", Draghi told his regular monthly press conference. "Incoming information confirms that the moderate recovery of the euro area economy is proceeding in line with our previous assessment," he added.
The governing council also revised down its 2014 inflation outlook for the eurozone, but revised up the projected economic expansion rate for this year. It raised the growth forecast for this year to 1.2% from 1.1% in December, maintaining a 1.5% growth estimate in 2015. In the first set of forecasts for 2016, it said that growth is seen at 1.8%.
However, the inflation forecast for this year was cut to 1% from 1.1%. The projection for next year, however, was left untouched at 1.3%. In 2016, inflation is seen at 1.5% and the figure is expected to rise to 1.7% in the fourth quarter of that year, coming close to the ECB's inflation target of just below 2%.
The news lifted the euro, with the single currency rising to a 2014 high against the dollar. At the close of the UK equity market, the euro was trading at USD1.3847, GBP1.6737, CHF1.2201 and JPY142.698.
London's stock indices took an early cue from gains in Asia, and got another boost as Wall Street also rose Thursday.
In the US, "stocks took on a more positive tone today as unemployment claims were lower than expected," said CMC Markets market analyst Jasper Lawler.
In an upbeat sign for the US labour market ahead of Friday's highly-anticipated monthly non-farm payrolls report, the Labor Department said that first-time claims for US unemployment benefits dropped to 323,000 in thee week to March 1, a decrease of 26,000 from the previous week's revised figure of 349,000. Economists had expected jobless claims to fall to 338,000, from the 348,000 originally reported for the previous week.
The FTSE 100 closed up 0.2% at 6,788.49, the FTSE 250 closed up 0.4% at 16,671.75, and the AIM All-Share index closed up 0.5% at 897.27.
In Europe, the CAC 40 in Paris closed up 0.6%, while the DAX 30 in Frankfurt closed marginally higher. On Wall Street, the DJIA was up 0.5%, the NASDAQ Composite up 0.2%, and the S&P 500 up 0.4%, at the close of the European markets.
At the individual UK stock level, financial services companies were amongst the leading gainers in the FTSE 100. Aviva, closing up 8.3%, was the blue-chip index's biggest winner. The life insurer reported a GBP2.05 billion operating profit for 2013, compared with GBP1.93 billion in 2012, while swinging to a GBP2.15 billion profit after tax from 2012's GBP2.93 billion loss.
"Following our exit from a number of low margin, underperforming or non-strategic businesses, Aviva is simpler, more focused and better managed. We have significantly improved our capital surplus, increased our liquidity and have a stronger leadership team," Chief Executive Mark Wilson said.
The group also said that it has reduced its inter-company loan by GBP1.7 billion to GBP4.1 billion, with an agreement reached with the UK's Prudential Regulation Authority to reduce the loan to GBB2.2 billion by the end of 2015.
Asset manager Schroders ended the day as the second biggest blue-chip winner, closing up 5.3%. It reported a 24% increase in pretax profit after management and performance fees swelled on the back of strong net inflows and reinforced by the acquisition of Cazenove Capital. The group will pay a 58.0 pence full-year dividend, up from 43.0 pence in 2012.
Temporary power company Aggreko, closing up 3.5%, was another big riser. Even though it reported that its 2013 pretax profit and revenues both fell from 2012, when it had been buoyed by its contracts to power the London Olympics, the group's results came in broadly in line with expectations and it increased its dividend by 10%.
IMI was the FTSE 100's heaviest loser. The engineering company reported an increase in profit and revenue for 2013, reflecting a strong performance across the continuing businesses, but saw its shares close down 5.2% as it warned of pressures on profit margins in the first half of 2014.
The steep decline proved to be a drag on the FTSE 350 industrial engineering sector which closed down 0.3%.
Imagination Technologies Group closing down 8.5%, was the stand out faller in the FTSE 250. It said that unit shipments of its chips had been below expectations due to a slower rate of smartphone market growth and a lower market share in the entry-level segment of the smartphone market.
Balfour Beatty was close behind, ending the day 7.4% lower, after the construction company reported a substantial drop in profit for 2013, hurt by the reorganisation of its UK construction business and a significant downturn in the Australian natural resources sector.
Fresnillo, Randgold Resources, and African Barrick Gold were all big winners in their respective indexes. The gold mining companies closed up 3.8%, 0.3%, and 6.1% respectively, lifted by an increasing gold price.
At the close of Thursday's stock market session, the yellow metal trades at USD1,348.05 per ounce.
In the data calendar Friday, German wholesale price index numbers are released at 0700 GMT, ahead of French trade data at 0745 GMT. The Bank of England releases its consumer inflation expectations at 0930 GMT. German industrial production data are scheduled at 1100 GMT.
In the US, the keenly-awaited non-farm payrolls reading for February is released at 1330 GMT, at the same time as the country's unemployment rate and trade balance. The President of the Federal Reserve Bank of New York William Dudley gives a speech at 1700 GMT.
In a much quieter corporate calendar, FTSE 250-listed Alliance Trust releases full-year results for 2013.
By James Kemp; [email protected]; @jamespkemp
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Related Shares:
Alliance TrustBalfour BeattyImagination Technologies GroupAGK.LAvivaSchrodersRandgold ResourcesFresnilloIMI