London midday: FTSE falls ahead of ECB policy decision
The FTSE 100 edged lower on Thursday as the pound strengthened and as investors looked ahead to the European Central Bank’s latest policy decision.
At 1202 GMT, the index fell 0.49% to 7,211.83 points while the pound rose 0.52% versus the dollar to $1.2325 and increased 0.20% against the euro to €1.1558.
Sterling unexpectedly shot up on Tuesday after Prime Minister Theresa May confirmed in a speech in London that Britain was leaving Europe’s single market. However, the news was softened by May saying parliament would get a vote on the final Brexit deal.
May spoke again on Thursday, this time at the World Economic Forum in Davos, saying the UK will be a “world leader” on trade. She said that after Brexit, Britain would take on a "leadership role as the strongest and most forceful advocate for free markets and free trade anywhere in the world".
Investors are now turning their focus to the ECB’s policy decision at 1245 GMT and press conference at 1330 GMT. The monetary authority is widely expected to stand pat on key rates and the asset purchase programme.
In December, the ECB decided to extend its quantitative easing programme by nine months. The ECB said it would pay monthly instalments of €80bn until March 2017 before lowering the programme to €60bn per month until the end of December.
Pantheon Macroeonomics said the ECB is unlikely to change policy following last month’s adjustments.
The economist said this will be the first ECB meeting for some time in which the bank’s President Mario Draghi will be able to report significantly higher inflation in the euro-area. Eurozone inflation jumped to 1.1% year-on-year in December from 0.6% in November, boosted by an increase in energy prices, Eurostat revealed on Wednesday.
“Mr. Draghi, however, will strike a dovish tone and confirm that the ECB will look through what it considers to be a temporary inflation surge due to base effects in energy prices,” Pantheon’s chief eurozone economist Claus Vistesen said.
Meanwhile, traders were also digesting the latest figures from the Royal Institution of Chartered Surveyors, which showed the housing market in the UK cooled in December, experiencing its weakest month since June.
RICS’ headline house price balance declined to +24 from +29 in November, missing analysts’ expectations for a nudged up to +30.
Simon Rubinsohn, chief economist at RICS, said: “The latest survey provides further evidence that both price and rent pressures are continuing to spread from the more highly valued to more modestly valued parts of the market for good or ill.”
In corporate stocks, Royal Mail slumped as the dwindling volume of letters to Father Christmas and other festive missives continued to hold back its sales, with revenues remaining flat in the nine months to 25 December.
Pets at Home sank after it posted a 4.4% rise in group revenue for the third quarter and said the profit outlook for the year remains in line with expectations, while Acacia Mining was on the back foot after its fourth-quarter production results.
Moneysupermarket.com surged after saying it expects to deliver strong full-year results, with revenue ahead by around 12% on the year.
Retailer Halfords was also sharply higher as it maintained its profit expectations for the full year following better-than-expected trading over the Christmas period.
N Brown shares rallied as it reported 4.1% growth in group revenue for the 18 weeks to the end of December, underpinned by a strong performance in the run-up to and during Black Friday.
Tullow Oil tanked after HSBC downgraded the stock to ‘hold’ from ‘buy’ but lifted the target price to 320p from 270p, saying the shares offer “limited upside”.
Market Movers
FTSE 100 (UKX) 7,212.09 -0.49%
FTSE 250 (MCX) 18,223.52 -0.49%
techMARK (TASX) 3,372.71 -0.18%
FTSE 100 - Risers
Smurfit Kappa Group (SKG) 2,129.00p 3.35%
Pearson (PSON) 586.50p 2.36%
Rolls-Royce Holdings (RR.) 705.00p 1.66%
Burberry Group (BRBY) 1,669.00p 1.15%
British American Tobacco (BATS) 4,679.50p 0.98%
Intertek Group (ITRK) 3,484.00p 0.64%
Morrison (Wm) Supermarkets (MRW) 240.40p 0.63%
Kingfisher (KGF) 349.10p 0.61%
Carnival (CCL) 4,195.00p 0.55%
Paddy Power Betfair (PPB) 8,645.00p 0.52%
FTSE 100 - Fallers
Royal Mail (RMG) 426.00p -5.21%
Fresnillo (FRES) 1,407.00p -2.76%
SSE (SSE) 1,514.00p -2.76%
Hammerson (HMSO) 547.50p -2.75%
British Land Company (BLND) 601.50p -2.67%
Intu Properties (INTU) 276.50p -1.95%
Land Securities Group (LAND) 996.00p -1.87%
Royal Dutch Shell 'B' (RDSB) 2,304.50p -1.79%
Anglo American (AAL) 1,320.00p -1.71%
Compass Group (CPG) 1,425.00p -1.66%
FTSE 250 - Risers
Halfords Group (HFD) 384.80p 8.95%
Brown (N.) Group (BWNG) 216.50p 6.55%
Moneysupermarket.com Group (MONY) 317.60p 4.82%
G4S (GFS) 253.50p 3.47%
Spirax-Sarco Engineering (SPX) 4,358.00p 2.32%
Mitie Group (MTO) 200.10p 2.20%
JRP Group (JRP) 145.50p 1.82%
Beazley (BEZ) 398.80p 1.53%
CLS Holdings (CLI) 1,615.00p 1.44%
IMI (IMI) 1,086.00p 1.40%
FTSE 250 - Fallers
Pets at Home Group (PETS) 218.60p -8.19%
Hochschild Mining (HOC) 224.70p -6.92%
Card Factory (CARD) 236.40p -4.95%
Acacia Mining (ACA) 412.60p -4.51%
Tullow Oil (TLW) 300.50p -3.72%
Capital & Counties Properties (CAPC) 272.00p -2.89%
Rightmove (RMV) 4,005.00p -2.81%
Great Portland Estates (GPOR) 619.00p -2.67%
LondonMetric Property (LMP) 146.80p -2.65%
Derwent London (DLN) 2,519.00p -2.48%