London close: Stocks gain on ECB stimulus hopes

UK stocks advanced on Thursday as European Central Bank President Mario Draghi hinted at further stimulus.

In a press conference following the ECB's decision to keep its key rates unchanged, Draghi said the central bank would “review and reconsider” its monetary policy measures at its next meeting in early March to help push inflation back towards the target of just below 2%

Draghi noted that the impact of falling oil prices meant inflation was expected to remain very low or at negative levels in coming months. He highlighted that downside risks to inflation included heightened uncertainty about the economies of emerging markets amid a slowdown in China, volatility in financial markets and commodities, and geopolitical risks.

As expected, the ECB announced it would leave its main policy rate at 0.05%, the deposit facility rate at -0.30% and the rate on the marginal lending facility at 0.30%.

Draghi defended the ECB's past policy measures as “entirely appropriate”, including last month's decision to cut the deposit rate by 10 basis points and to extend the €60bn a month asset purchase programme until at least the end of March 2017.

"As the ECB has already extended running its quantitative easing programme to at least the end of March 2017, this suggests that there has to be a good chance that the ECB will step up its monthly spend on assets from the current level of €60bn," said Howard Archer, chief UK and European economist at IHS Global Insight.

Elsewhere, Japan’s Nikkei index closed down 2.43%, continuing its drop after ending in a bear market on Wednesday as Bank of Japan Governor Haruhiko Kuroda said on Thursday he wasn’t considering adopting a negative interest rate policy to boost the economy. Hong Kong’s Hang Seng index and the Shanghai Composite were also in the red amid fears over the slowdown in China’s economy.

The People’s Bank of China offered 400bn yuan worth of short-term loans to commercial lenders on Thursday through its open-market operations.

“The moves have more to do with offsetting the usual spike in liquidity demand ahead of Chinese New Year than a response to capital outflows or an attempt at monetary easing,” according to Capital Economics.

Meanwhile, oil prices remained under pressure on worries about an oversupplied market but recovered slightly in afternoon trade on hopes of further ECB stimulus.

At 1632 GMT, Brent crude rose 2.5% to $28.61 per barrel and West Texas Intermediate increased 2.4% to $29.07 per barrel.

The US Energy Information Administration on Thursday said that crude oil inventories increased by 3.98m barrels in the week to 15 January, ahead of the 2.2m barrels expected by analysts.

The US also saw the release of the Labor Department’s weekly jobless claims data. Weekly initial jobless claims rose to 293,000 in the week to 16 January from 283,000 the previous week, missing expectations for a fall to 278,000.

The index for activity in the Philadelphia Fed’s manufacturing business outlook survey rose to minus 3.5 from a revised reading of minus 10.2 in December, compared to forecasts of minus 5.

In company news, Pearson jumped despite warning that full-year profit would be below forecasts as it undergoes a new restructuring.

As metal prices rebounded, blue chip mining companies gained including Glencore, BHP Billiton and Anglo American.

ITV declined after UBS initiated of the stock at ‘sell’ with a price target of 230p as it began covering the European broadcasting sector.

Polymetal slumped after saying 2015 gold production fell 9% to 861,000 ounces, while silver production rose 12% to 32.1m ounces.

Royal Mail edged higher after reporting a strong Christmas period, with UK parcel volumes in December 6% better than the year before, and saying it was on track to snip UK parcel costs by at least 1% for the full year.

Compass Group declined after the company went ex-dividend with a final dividend of 19.6p per share.

Acacia Mining rose after it said gold production nudged up in 2015 and announced plans to raise guidance for this year following the ramp-up of the flagship Bulyanhulu mine.

Halfords pedalled to the front of the peloton after it said group like-for-like sales rose 0.3% in the third quarter with the company reporting that full year pre-tax profit expectations would be unchanged.

Shares in specialist clothing retailer N Brown rocketed as it posted a jump in third quarter revenue and said it was on track to meet full year expectations.

Electra Private Equity tumbled after it went ex-dividend today, paying 78p per share.

Market Movers

FTSE 100 (UKX) 5,765.70 1.62%
FTSE 250 (MCX) 15,824.88 1.18%
techMARK (TASX) 3,029.38 0.85%

FTSE 100 - Risers

Pearson (PSON) 772.00p 17.41%
Glencore (GLEN) 82.25p 15.52%
Anglo American (AAL) 248.00p 12.19%
BHP Billiton (BLT) 642.80p 10.66%
Rio Tinto (RIO) 1,667.50p 5.71%
Antofagasta (ANTO) 364.60p 5.35%
Aberdeen Asset Management (ADN) 226.00p 4.39%
BP (BP.) 342.25p 4.30%
Royal Mail (RMG) 438.70p 4.08%
Worldpay Group (WI) (WPG) 299.50p 4.07%

FTSE 100 - Fallers

Compass Group (CPG) 1,086.00p -4.23%
SSE (SSE) 1,344.00p -2.96%
BAE Systems (BA.) 478.60p -2.33%
Sports Direct International (SPD) 398.20p -1.41%
Sky (SKY) 1,012.00p -0.98%
Hikma Pharmaceuticals (HIK) 1,904.00p -0.94%
Sainsbury (J) (SBRY) 231.10p -0.77%
DCC (DCC) 4,949.00p -0.48%
Provident Financial (PFG) 2,845.00p -0.39%
Imperial Tobacco Group (IMT) 3,464.50p -0.37%

FTSE 250 - Risers

Halfords Group (HFD) 365.40p 12.43%
Brown (N.) Group (BWNG) 307.00p 9.25%
Tullow Oil (TLW) 129.00p 9.14%
Acacia Mining (ACA) 175.90p 8.71%
Amec Foster Wheeler (AMFW) 375.70p 8.62%
OneSavings Bank (OSB) 305.90p 7.71%
Ocado Group (OCDO) 281.90p 6.38%
Drax Group (DRX) 222.40p 6.36%
Evraz (EVR) 63.30p 6.30%
WH Smith (SMWH) 1,778.00p 5.83%

FTSE 250 - Fallers

Electra Private Equity (ELTA) 3,400.00p -5.05%
P2P Global Investments C (P2P2) 910.00p -4.61%
P2P Global Investments (P2P) 915.00p -4.59%
Clarkson (CKN) 1,997.00p -3.29%
PZ Cussons (PZC) 262.90p -2.77%
Just Eat (JE.) 407.70p -2.58%
Home Retail Group (HOME) 136.40p -2.57%
Nostrum Oil & Gas (NOG) 294.00p -2.46%
Jimmy Choo (CHOO) 122.00p -2.40%
IP Group (IPO) 173.50p -2.36%