London close: Stocks close red as ECB expands easing
London stocks closed in the red on Thursday following three days of gains, as investors mulled the latest reading on the UK construction sector and rifled through the European Central Bank’s latest easing announcement.
The FTSE 100 ended the session down 0.64% at 6,341.44 and the FTSE 250 was 0.4% weaker at 17,825.96.
Sterling was weaker against both of its major trading pairs, last gaining 0.28% on the dollar to $1.2610, while it slid 0.51% on the euro to €1.1137.
During the afternoon, it was revealed that policymakers had decided to increase the size of the ECB's pandemic emergency purchase programme (PEPP) by €600bn - more than the €500bn pencilled in by markets - and to extend its duration until June 2021 at the earliest.
Purchases under PEPP would continue for as long as the coronavirus crisis phase, the ECB said in its policy statement.
The council reiterated that PEPP purchases would be conducted over time and across countries "flexibly" in order to ensure the "smooth" transition of monetary policy.
All of the ECB's main interest rates were steady, with that for the main refinancing operations kept at 0.0%, the marginal lending facility at 0.25% and the deposit facility at -0.5%.
Deutsche Bank analyst Jim Reid said earlier that investors were hoping for the central bank to add further monetary stimulus.
“[That], alongside the switch back into value over growth, has perhaps been helping to support the rally over recent days."
Sino-US relations were also in focus, after the Trump administration said it was barring Chinese airlines from flying to the US from 16 June.
The decision, which was made by the US Department of Transportation, is understood to have been a response to Beijing forbidding US air carriers from resuming flights to China amid the Covid crisis.
China's civil aviation regulator subsequently issued a notice allowing US carriers to resume limited services into the country.
On home shores, a survey released earlier showed the downturn in the construction sector eased last month as sites started to reopen, but output remained at record lows.
The IHS Markit/CIPS UK construction total activity index was 28.9 in May, the second-lowest since February 2009 and well below the neutral 50.0 point.
Anything above that signals growth, anything below indicates contraction, although the reading was still a marked improvement on April’s historic low of 8.2.
The construction sector has been hit hard by the Covid-19 pandemic, with the lockdown closing sites and companies across the supply chain temporarily shutting down and furloughing staff.
“A complete recovery in activity to pre-virus levels in the second half of this year remains highly unlikely,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
“Many building sites reopened during the month to complete projects underway before the lockdown. Output likely will rise further in June, as shortages of raw materials and protective equipment ease, and the labour supply improves now that some workers can send their children to school again.
“Nonetheless, the relatively modest rise in new orders index - to 25.1 in May from 10.4 in April - suggest clients remain reluctant to commission new projects while the economic outlook is very uncertain.”
In UK equity markets, Rolls-Royce was 1.28% lower after the aerospace and defence giant said it was cutting 1,500 jobs at its base in Derby and 700 at its Renfrewshire plant in Scotland.
It had already announced last month that it would be axing 9,000 jobs.
Shares of Aston Martin Lagonda slid 3.2% after the luxury car maker said it was axing up to 500 jobs as it cut back production of front-engined sports cars and focussed on its DBX sports utility model.
Pennon Group was in the red by 4.95% after it increased its annual dividend by 6.6% but halved its target for dividend growth as the water company set aside almost £9m for bad debts from Covid-19.
Elsewhere, office space provider IWG was hit by a downgrade to ‘sector perform’ at RBC Capital Markets, falling 4.61%, while Electrocomponents was 4.04% lower after a downgrade to ‘neutral’ at JPMorgan.
FTSE 100 - Risers
easyJet (EZJ) 833.00p 6.20%
International Consolidated Airlines Group SA (CDI) (IAG) 288.20p 3.22%
Meggitt (MGGT) 339.60p 2.88%
Carnival (CCL) 1,194.50p 1.70%
Berkeley Group Holdings (The) (BKG) 4,363.00p 1.61%
SEGRO (SGRO) 885.20p 1.42%
Fresnillo (FRES) 756.80p 1.34%
M&G (MNG) 150.75p 1.11%
Royal Bank of Scotland Group (RBS) 126.10p 0.96%
Experian (EXPN) 2,914.00p 0.94%
FTSE 100 - Fallers
Intermediate Capital Group (ICP) 1,281.00p -7.58%
Pennon Group (PNN) 1,134.00p -4.95%
Whitbread (WTB) 2,525.00p -4.75%
Hargreaves Lansdown (HL.) 1,622.50p -4.25%
Schroders (SDR) 3,030.00p -3.29%
Rightmove (RMV) 594.00p -3.00%
Informa (INF) 491.80p -2.92%
SSE (SSE) 1,267.50p -2.76%
Smurfit Kappa Group (SKG) 2,600.00p -2.69%
Smith (DS) (SMDS) 345.40p -2.62%
FTSE 250 - Risers
Hyve Group (HYVE) 133.00p 27.03%
Senior (SNR) 91.00p 17.42%
Helios Towers (HTWS) 178.00p 10.01%
Ascential (ASCL) 297.00p 9.35%
Euromoney Institutional Investor (ERM) 838.00p 8.27%
Coats Group (COA) 59.20p 7.25%
RHI Magnesita N.V. (DI) (RHIM) 2,836.00p 5.04%
G4S (GFS) 105.50p 4.98%
Playtech (PTEC) 319.40p 4.86%
4Imprint Group (FOUR) 2,560.00p 4.70%
FTSE 250 - Fallers
Hammerson (HMSO) 118.95p -13.65%
Trainline (TRN) 496.00p -5.07%
Future (FUTR) 1,236.00p -5.07%
IWG (IWG) 289.40p -4.61%
Caledonia Investments (CLDN) 2,725.00p -4.22%
Electrocomponents (ECM) 677.00p -4.04%
JPMorgan Indian Investment Trust (JII) 523.00p -3.68%
Avast (AVST) 482.20p -3.66%
Cineworld Group (CINE) 85.46p -3.63%
Fisher (James) & Sons (FSJ) 1,290.00p -3.47%