London close: Stocks in the red as ECB pumps bond-buying brakes

London stocks remained in the red by the close on Thursday, as investors digested the news that the European Central Bank was set to lower bond purchases.

The FTSE 100 ended the session down 1.01% at 7,024.21, and the FTSE 250 was 0.21% weaker at 23,799.94.

Sterling was in positive territory, meanwhile, last gaining 0.6% on the dollar to $1.3854, and strengthening 0.5% against the euro to trade at €1.1713.

“It has been a tough day for airlines, with easyJet taking a 10% nosedive on a £1.2bn rights issue while US airlines warned of a slowdown in sales thanks to rising Delta cases,” said IG senior market analyst Joshua Mahony.

“The Wizz Air takeover approach for easyJet may have been rebuffed, but it does provide plenty of clues over which companies are faring better than others.

“While the recent moves to reduce quarantine and testing requirements for vaccinated travellers does raise hopes of a surge in European bookings, we are looking at a second lost summer for airlines that will undoubtedly find it tough to operate without raising fresh funds.”

Mahony said that while the declines seen elsewhere might prove ill-founded, there was a “distinct fear” that easyJet would not be the last airline shoring up its balance sheet.

Just after lunch, ratesetters in Frankfurt decided to lower bond purchases under their emergency asset buying programme "moderately" but kept all the other main policy levers unchanged, including the size of the bond buying programme not linked to the pandemic.

In its policy announcement, the European Central bank said that favourable financing conditions could now be maintained with a "moderately" lower pace of purchases under the Pandemic Emergency Purchase Programme than in the prior two quarters.

It did not specify for how long that lower pace would apply nor whether it would be closer to the €60bn per month clip observed in the first three months of the year or the €80bn pace more recently observed.

However, the size of the total envelope for PEPP was kept at €1.85trn and with purchases still set to run until at least the end of March 2022 "and, in any case, until it judges that the coronavirus crisis phase is over."

"The 'calibrate, not taper' narrative gave us deja-vu of the December 2016 press conference. Further TLTRO operations will be discussed alongside the general stance at the December meeting, but will be data dependent," said analysts at Danske Bank.

They also noted Lagarde's confirmation during the presser that, as ECB chief economist Philip Lane had pointed out in the past, the APP should not be judged in isolation of the net supply in issuance.

"Overall, we largely share the ECB’s cautiously optimistic outlook for the economy and transitory inflation narrative."

Factory gate inflation in China, meanwhile, hit a 13-year high in August as manufacturers responded to the high cost of commodities, official figures showed.

The producer price index (PPI) rose at an annual rate of 9.5% in August, up from 9% a month earlier and outstripping analyst expectations for no change.

That reading, supplied by the National Bureau of Statistics, was the highest since the 10.1% increase recorded in August 2008.

On home shores, UK house price growth started to ease in August as the market calmed down from a frantic rush to buy spurred by the Chancellor's stamp duty holiday, a survey showed.

Prices rose faster than normal in August but the rate slowed from sharp increases recorded in early summer, the Royal Institution of Chartered Surveyors' (RICS) survey of estate agents showed.

The net balance, which shows the difference between agents reporting rising and falling prices, was +73 compared with +81 in May and early June.

“The latest survey evidence inevitably points to market activity taking a breather following the flurry of sales seen ahead of the tapered stamp duty holiday withdrawal,” said Tarrant Parsons, an economist at RICS.

“That said, while momentum has eased relative to an exceptionally strong stretch earlier in the year, there are still many factors likely to drive a solid market going forward.”

In equity markets, budget airline easyJet descended 10.24% after saying it would raise £1.2bn from shareholders in a rights issue to strengthen its balance sheet after turning down a preliminary takeover approach.

Gambling company 888 Holdings was in the red by 3.28% after agreeing to buy the non-US international business of William Hill from Caesars Entertainment for £2.2bn.

Animal genetics company Genus tumbled 7.63% after it reported a jump in full-year profit and revenue as it continued to win new customers, with growth in both of its business, but warned that recent volatility in the Chinese porcine market will dent growth.

Elsewhere, Melrose Industries lost 2.91% and Oxford Instruments slipped 0.28%, as both traded without entitlement to the dividend.

On the upside, Computacenter rallied 1.61% after it posted a jump in interim profit but cautioned that shortages of electronic components are set to last until "well into" 2022.

B&M European Value Retail was a high riser again, adding 1.11% after rallying on Wednesday after the company said it expected interim core earnings to be ahead of analysts’ forecasts on the back of stronger gross margins.

The owner of discount retail stores said adjusted earnings before interest, taxes, depreciation and amortisation for the six months to 25 September would be in a range of £275m to £285m, versus consensus of around £235m.

IP Group was at the right end of the FTSE 250, gaining 5.58% after portfolio company Oxford Nanopore announced plans to list on the London Stock Exchange.

ConvaTec was boosted 1.98% by an upgrade to 'overweight' from 'neutral' at JPMorgan, while Hays was 2.37% firmer after an upgrade to ‘overweight’ at Barclays.

Market Movers

FTSE 100 (UKX) 7,024.21 -1.01%
FTSE 250 (MCX) 23,799.94 -0.21%
techMARK (TASX) 4,709.18 -1.03%

FTSE 100 - Risers

M&G (MNG) 201.90p 1.43%
B&M European Value Retail S.A. (DI) (BME) 585.60p 1.31%
Whitbread (WTB) 3,292.00p 1.26%
Intermediate Capital Group (ICP) 2,242.00p 0.85%
Persimmon (PSN) 2,740.00p 0.85%
Barratt Developments (BDEV) 689.60p 0.79%
Kingfisher (KGF) 350.70p 0.78%
Burberry Group (BRBY) 1,921.00p 0.73%
Smith (DS) (SMDS) 455.50p 0.73%
InterContinental Hotels Group (IHG) 4,586.00p 0.72%

FTSE 100 - Fallers

Coca-Cola HBC AG (CDI) (CCH) 2,484.00p -4.28%
DCC (CDI) (DCC) 6,140.00p -3.43%
Melrose Industries (MRO) 178.15p -3.34%
Prudential (PRU) 1,486.00p -2.94%
Polymetal International (POLY) 1,393.00p -2.93%
Rio Tinto (RIO) 5,163.00p -2.68%
Vodafone Group (VOD) 118.88p -2.43%
BT Group (BT.A) 160.95p -2.37%
Hargreaves Lansdown (HL.) 1,446.00p -2.33%
British American Tobacco (BATS) 2,663.50p -2.19%

FTSE 250 - Risers

IP Group (IPO) 156.00p 6.12%
Grainger (GRI) 332.60p 3.94%
Pagegroup (PAGE) 632.50p 2.68%
Beazley (BEZ) 404.00p 2.64%
Hays (HAS) 168.30p 2.06%
Convatec Group (CTEC) 226.70p 1.98%
JTC (JTC) 804.00p 1.90%
Volution Group (FAN) 551.00p 1.85%
Harbour Energy (HBR) 374.40p 1.79%
Travis Perkins (TPK) 1,819.00p 1.76%

FTSE 250 - Fallers

easyJet (EZJ) 708.20p -10.24%
Genus (GNS) 5,450.00p -7.63%
Cineworld Group (CINE) 62.70p -4.77%
Moonpig Group (MOON) 364.60p -4.20%
888 Holdings (888) 388.40p -3.43%
Mitchells & Butlers (MAB) 271.40p -3.42%
Tullow Oil (TLW) 40.27p -3.27%
SSP Group (SSPG) 257.50p -3.01%
BBGI Global Infrastructure S.A. NPV (DI) (BBGI) 170.40p -2.85%
Inchcape (INCH) 845.50p -2.59%