6th Feb 2014 10:50
LONDON (Alliance News) - Stock markets have started strongly Thursday, with the FTSE 100 recording its best gains for many sessions, led higher by house builders after Halifax said UK house prices are rising faster than expected.
Meanwhile the pound and the euro remain subdued ahead of the Bank of England and European Central Bank meetings at midday.
By mid-morning Thursday the FTSE 100 is up 0.8% at 6,506.90, the FTSE 250 is up 0.9% at 15,698.35, and the AIM All-Share is up 0.7% at 858.70.
Major European markets are also higher, with the CAC 40 and the DAX both up 1.0%.
House prices in the UK 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%, recording a rise again from the 0.6% drop in December.
"With the supply of properties being slow to respond to more buoyant market conditions, stronger demand has resulted in continued upward pressure on house prices", Halifax said in a statement.
The booming UK property market has been supporting house-builder stocks, and the latest reading has provided an extra boost. The Household Goods sector of the FTSE 350, which contains the house builders, is up 2.2%, leading the stock market gains Thursday. Bellway is the biggest gaining housebuilder, up 1.7%, while Barratt Developments is up 1.4% and FTSE 100 constituent Persimmon is 1.2% higher.
Mobile Telecommunications and Technology stocks are also strong gainers on the back of some positive corporate news. Vodafone shares are up 2.3% after the company said that it remains on track to hit its operating profit target of around GBP5 billion.
Imagination Technologies is the biggest gainer by far in the FTSE 250, up a massive 19%. The group said Thursday that it had extended its multi-year, multi-use license agreement with the US's Apple Corp. There had been concern that Apple would begin to use its own designs or go to another supplier for the technology it licences from Imagination Technologies, but Thursday's 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.
A handful of FTSE 100 stocks in the red Thursday - an unusual sight in recent days. AstraZeneca is the heaviest faller, down 3.1% 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.
Outside of the UK house price report, the economic calendar has been empty so far Thursday, leaving both the pound and the euro stable ahead of their major risk events still to come. Against the dollar the pound trades at USD1.6295 and the euro trades at USD1.3522.
The Bank of England announces its latest interest rate decision at midday, with no policy change expected. Governor Mark Carney is widely expected to remain quiet Thursday and release no statement, given that he will be delivering the quarterly inflation report next week.
All eyes will be on the European Central Bank at 1245 GMT, however, with opinion split over whether further policy easing will be announced or not. The ECB cut its base rate to 0.25% in November 2013, and since then deflationary pressures in the eurozone have continued to be of concern, with the latest official figures showing that inflation fell to 0.7% in January from 0.8% in December. However, other economic indicators like the PMI's in the region have been showing gradual improvements, suggesting the eurozone economy may recover without further stimulus.
"There is a significant minority in the market expecting a further 15bp shift down in the refinancing rate to 0.1%", says Societe Generale Senior Strategist Kit Jukes. Jukes expects no rate change however, suggesting that talk of further action in the future at the press conference is more likely. Mario Draghi will hold his usual press conference at 1330 GMT.
US initial jobless claims data are due at 1330 GMT, with the expectation for a slight drop in claims to 335,000 from 348,000 last week.
By Jon Darby; [email protected]; @jondarby100
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Related Shares:
AstrazenecaImagination Technologies GroupBellwayBarratt DevelopmentsPersimmon