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FTSE 100 closes lower as traders mull ECB policy

The FTSE 100 closed at 7,237 as the European Central Bank announced its latest policy decision
mario draghi
Mario Draghi says the ECB will keep all key rates on hold
  • FTSE 100 closes down 51

  • Ex-dividend shares weigh

  • ECB keeps key rates unchanged

  • Lloyds impresses with first quarter results

 

Britain's blue chips closed over 51 points lower with big miners lagging and US shares also heading south.

The FTSE 100 finished down 51.55, or 0.71% at 7,237.

The FTSE 250 was also lower - over 49 points - at 19,636.

Ex-dividend stocks like Legal & General (LON:LGEN) were the biggest losers, with the pensions and investment giant shedding over 5% to 246.90p.

BHP Billiton plc (LON:BHT), the world's biggest digger, was the second biggest laggard, losing 4.75% to 1,153.5p.

On the rising front, Lloyds (LONM:LLOY) added 2.31% to stand at 68.97p after it reported a rise in profits in the three months to the end of March, despite the "challenging" environment.

Pre-tax profits doubled from a year ago to £1.3bn in the first quarter.

In the US, the Dow Jones added over 23 point to 21,003.

3.45pm....FTSE heads further south as pound strengthens

As we head closer to the close, the FTSE 100 has shed 59 points to 7,229.23 as the pound rose 0.39% against the dollar to US$1.2898 and increased 0.76% versus the euro at €1.1872.

Ex-dividend stocks, including Legal & General, ITV, Fresnillo and Antofagasta, were among the biggest fallers. Housebuilders gained on a positive read-across on well-received trading updates from Persimmon and Taylor Wimpey

The euro weakened after the European Central Bank said the region still needs a sUBStantial degree of monetary accommodation to reach its inflation targets. In the US, the market continued to dwell on President Donald Trump's tax announcement, which disappointed due to his lack of clarity and worries that it will struggle to pass in Congress. 

 

3.10pm....US shares start higher

 

Wall Street shares started positively as traders mulled over a clutch of earnings reports.

The Dow Jones is up 23 at 20,998, while the Nasdaq is up around 20 points at 6,045.

The broader based S&P500 is ahead by almost three points at 2,381.

 

2.37pm...What analysts think of ECB press conference

The ECB press conference has wrapped up and this is what some analysts had to say:

Paul Sirani, chief market analyst at Xtrade, said: “Emmanuel Macron's first round victory stabilised markets earlier this week and investors will have perked up after hearing Mario Draghi’s comments that downside risks have fallen. However, much of the ECB president’s tone appears relatively dovish and he doesn’t seem overly eager on altering monetary policy any time soon,"

Richard Berry, founder of Berry FX, said: "After three days of walking on air, the Euro has been brought back down to Earth by the ECB’s reality check. With the QE money presses set to continue rolling until the end of the year and an interest rate rise off the table until at least 2018, the doves still rule the roost at the ECB."

Dennis de Jong, managing director at UFX.com, said: “Draghi has done a commendable job steering the eurozone through some particularly troubled waters, and will feel vindicated to see his much criticised stimulus programme appear to return dividends. However, there are still a number of uncertainties hanging over the eurozone, not least the ongoing Brexit negotiations and the upcoming French presidential election – both of which could have the potential to derail Europe’s fragile recovery.”

Neil Wilson, senior market analyst at ETX Capital, said: "A key line was Draghi saying the ECB is not sufficiently confident that inflation will converge with the target in a consistent manner. There does seem to be some argument within the Governing Council and it will be critical how this plays out over the next few weeks if we are to get a policy shift or hint of tapering in June. As we thought would be the case, dollar bulls were disappointed. The stage is now set for a very interesting meeting in June.”

 

2.18pm... ECB's Draghi says QE did not create inequality

Draghi has defended the stimulus programme against claims it created more inequality between the rich and poor Eurozone nations.

He said growth is improving and the recovery is broad and solid.

2.01pm...Euro loses ground against dollar

The euro rose to US$1.903 when ECB President Mario Draghi said downwide risks had fallen. “The risks surrounding the eurozone growth outlook, while moving to a more balanced configuration, are still tilted to the downside and relate predominantly to global factors," he said.

But the euro is back to US$1.0906 after he said there was not enough evidence to change the ECB's inflation outlook.

 

 

1.42pm...Draghi says French election not a consideration in ECB policy

In a press conference after the European Central Bank announced its decision to keep policy unchanged, President Mario Draghi insisted that the French presidential election did not influence this month's decision.

"We don’t set monetary policy based on election outcomes," Draghi said in response to reporter's question about the issue.

He also dismissed criticism from German Finance Minister, Wolfgang Schaeuble, who said the ECB's loose monetary policy measures were not helping. Draghi said it was ironic to hear this from someone who supports central bank independence.

 

1.21pm...'Beware the wrath of eurozone heavyweights', UFX analyst warns ECB

Dennis de Jong, managing director at UFX.com, comments on the ECB's decision to keep policy unchanged:

“Mario Draghi has stuck to his guns when it comes to rock bottom interest rates, but the ECB needs to beware the wrath of the eurozone heavyweights.

“With German inflation rebounding after somewhat of a false dawn in March, Chancellor Merkel may feel the need to appease her electorate by leaning slightly harder on her colleagues in Frankfurt.

“Balancing poorer nations’ growth with the more powerful, richer countries’ wishes will be a tricky balancing act for the ECB in the months ahead – especially if Eurosceptic Marine Le Pen wins the French presidential election next week.”

 

12.45pm... ECB leaves policy unchanged

The European Central Bank has left all its key rates unchanged, as expected by economists.

The interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The ECB also reiterated that it will taper asset purchases to €60bn per month from €80bn in April but would increase the size or length of the programme if needed. 

 

12.25pm...FTSE 100 falls as pound strengthens

The FTSE 100 has fallen 33 points to 7,255.23, dragged lower by ex-dividend stocks and disappointment over US President Donald Trump’s tax announcement.

Miners Fresnillo and Antofagasta were some of the biggest fallers on London’s top tier index as they went ex-dividend along with Legal & General, ITV, Informa and Relx.

The pound’s gains against the dollar and the euro also weighed on the FTSE. Sterling rose 0.38% to US$1.2897 and 0.42% to €1.1832.

“However, despite the consistency of its gains the pound remains in drastically different positions against the two currencies,” said Connor Campbell, financial analyst at Spreadex. “While cable has spent the morning dipping its toes across $1.29, hitting highs not seen since the start of October 2016, against the euro the pound still has a way to go before it recovers the French election-inspired losses it incurred on Monday. “

Meanwhile, investors continued to weigh Trump’s tax announcement amid worries that his lack of clarity will mean the policies won’t get passed in Congress.

The market is also looking ahead to the European Central Bank’s policy decision and President Mario Draghi’s press conference.

 

11.50am...Servoca gains, Richoux slumps

Among the small caps, Servoca shares jumped 23.86% to 27.25p after saying it made a positive start to the year. The company, which provides outsourcing recruitment to the healthcare and education sectors, said results for the first six months beat its expectations and were ahead of the same period a year earlier.

Amryt Pharma shares advanced 11.82% to 24.60p after saying a real world study of its cholesterol-lowering drug. Lojuxta, showed it to be “very powerful and well tolerated”.

On the downside, restaurant owner Richoux Group's shares dropped 22.02% to 21.44p after dishing up a fall in full year underlying earnings and warning that a deterioration in consumer confidence could impact sales. 

Synairgen has tumbled 46.15% to 14.0p after AstraZeneca returned the rights to a promising respiratory drug as it did not meet “predefined criteria for progression”.

 

11.03am...UK consumer confidence falls in April

UK consumer confidence fell in April as rising inflation hit disposable incomes, according to the European Commission.

The Commission’s consumer confidence index fell to -5.0 in April from -4.3 in March and February. A weaker pound following last June’s Brexit vote has pushed inflation higher, putting pressure on consumers.

“The survey reinforces the impression that consumers’ spirits have been dampened as their purchasing power is increasingly squeezed by markedly rising inflation and muted earnings growth,” said Howard Archer, chief UK and European economist at IHS Global Insight.

“Furthermore, the rise in inflation has been led by higher fuel and food prices which affects most people, and reduces money available for discretionary spending.”

 

10.45am... Proactive news headlines

Ferrum Crescent PLC (LON:FCR) has called time on its Moonlight iron ore project in Limpopo, South Africa after failing to find a partner. The company is to undertake an orderly winding-up and hand-over process of the operations and licences as soon as practicable. Shares fell 18% to 0.11p.

Eland Oil & Gas PLC (LON:ELA) has unveiled a reserves upgrade that delivers a three-fold increase in recoverable reserves for the wells at the Opuama and Gbetiokun operations in Nigeria. Proven and probable (2P) reserves for a total of four wells (Opuama-1, Opuama-3, Opuama-7 and Gbetiokun-1) are set at 33.5mln barrels – which amounts to 11.48mln net for Eland’s stake, after royalties.

Amryt Pharma PLC (LON:AMYT) said a real world study of its cholesterol-lowering drug showed it to be “very powerful and well tolerated”. In fact Lojuxta performed better in the field than it did in phase III clinical trials in treating Familial Hypercholesterolaemia (HoFH). Shares rose 13% to 24.8p.

C4X Discovery Holdings plc's (LON:C4XD) half-year results charted a period of significant change which now sees it primed for progress. It has shifted to developing a high-value, pre-clinical portfolio from which it hopes to create revenue-generating licensing deals. The existing fee-for-service agreements have stopped.

Currency shifts and a drop in downstream sales affected Green Dragon Gas Ltd (LON:GDG) in 2016 even though the amount of gas its own wells sold rose by a third. Green Dragon’s coal bed wells in China saw a 34% rise in sales and generated a profit of US$16.5mln, but the downstream issues sent the group overall into a US$12.1mln loss.

KEFI Minerals plc (LON:KEFI) has received a financial boost from the Ethiopian Revenues and Customs Authority in the form of a £1mln VAT refund. The country is host to the gold explorer’s Tulu Kapi project, which is being developed for production.

 

10.25am... Ex-dividend stocks weigh on FTSE

Shares in Legal & General, RELX, Antofagasta, Fresnillo, and Informa have slipped lower after going ex-dividend, knocking 5.65 points off the FTSE 100.

 

10.04am... Pharmaceutical shares slide

AstraZeneca slumped after reported a 12% drop in revenue to US$5.4bn in the first quarter as product sales declined 13%.

Copycat competition for big sellers such as cholesterol-buster Crestor hurt the company’s revenue. AZ expects the top line will be down low- to mid-single digits percentage points for the year as a whole, with earnings likely to fall in the low- to mid-teens.

Sector peers, including Shire and GlaxoSmithKline, are also under the cosh. The Association of the British Pharmaceutical Industry warned that the world's biggest drug companies will abandon Britain unless the NHS receives an extra £20bn a year. 

 

09.33am...Mediclinic and Persimmon top risers 

Mediclinic International (LON:MDC) is a top riser on the FTSE 100 after the hospital operator said Abu Dhabi waived 20% of the co-payment for a Thiqa health insurance card at private medical centres.

Shares surged 18.74% to 868p.

The company, which operates six hospitals and 34 clinics in the Middle East, said: “Mediclinic will continue to monitor the regulatory environment and the extent to which these changes will affect the Middle East operating platform.”

Persimmon plc (LON:PSN) was another standout on London’s top tier index, with shares up 1.27% to 2,315p,  after it said a resilient UK economy meant its “operational performance continues to be excellent”.

In trading update ahead of its annual general meeting today in York, the FTSE 100-listed firm said its total forward sales revenue, including legal completions taken to date, is currently £2.56bn, around 11% higher £2.31bn seen at the same stage in 2016.

 

 

09.00am... UK stocks lower after Trump disappointment 

The FTSE 100 has fallen 42 points to 7,246.22 as US President Donald Trump disappointed the market with his tax policies and as investors awaited the European Central Bank's latest policy decision.

Trump's plan included a cut to corporation tax to 15% from 35% and an incentive for multinational groups to repatriate trillions of dollars held overseas. However, investors are worried that his proposals lacked clarity and would struggle to gain approval in Congress.

“Alongside cutting corporate tax rates to 15%, Treasury Secretary Steven Mnuchin and National Economic Council director Gary Cohn revealed that the USA’s 7 tax brackets would be reduced to 3, while the alternative minimum tax would be slashed and nearly all of the current tax deductions eliminated,” Connor Campbell, financial analyst at Spreadex.

“Yet when pressed for more information, specifically if these reforms would be revenue neutral, the pair came up short, producing some Trumped up rhetoric about how it would pay for itself through ‘growth, reduction of deductions and closing loopholes’ and that the administration had a ‘once in-a-generation opportunity to do something really big’. “

Turning to today’s agenda, the ECB announces its policy decision today. With economists expecting the central bank to keep all key rates unchanged, the focus will be on ECB President Mario Draghi’s press conference for hints on the next course of action.

“While no changes to asset purchases or interest rates are expected, Mario Draghi’s tone will guide the euro,” said FXTM chief market strategist, Hussein Sayed.

“The euro will trade based on whether Mario Draghi looks at the glass half full or half empty. However, I find it difficult not to acknowledge the improvement in economic developments, and that’s why I see further potential for the single currency to move higher.”

Company-wise, shares in Lloyds Banking Group plc (LON:LLOY) jumped after the lender saw its first-quarter results beat market expectations, despite further provisions for conduct issues.

The part-state-owned lender reaffirmed its full-year guidance as its statutory pre-tax profit jumped to £1.304bn in the three months to 31 March, up from £654mln a year earlier and £973mln in the final quarter of 2016. UBS had expected the bank’s pre-tax profits to hit £1.21bn helped by the absence of last year’s £790mln cost of buying back high income bonds.

Europa Oil & Gas (Holdings) Plc (LON:EOG) was also on the front foot after identifying a further four new exploration prospects in Ireland’s Atlantic exploration frontier.

The explorer says an investigation of the ‘deeper prospectivity’ in Frontier Exploration Licence (FEL) 2/13 has unearthed new targets, and it sees four of them – tagged by Europa as ‘Kilroy’, ‘Keane’, ‘Kiely’ and ‘Lead F’ - as being significant.

WPP plc (LON:WPP) was in the red after reporting a slowdown in sales growth in the first quarter as it lost some major accounts, including AT&T and VW. Like-for-like sales rose 0.8% in the first three months, compared to 2.1% in the fourth quarter of last year.

 

 

06.58am... FTSE to open lower

London’s FTSE 100 is set to open lower after President Donald Trump’s hotly anticipated announcement of a new tax plan failed to wow markets. Sad.

Equity markets had made good headway in anticipation of Trump’s big unveiling, but, when it came the actual proposals lacked detail and trading in the markets cooled.

After making a strong start, Wall Street benchmarks ended Wednesday in negative territory.

The Dow Jones closed 21 points, 0.1%, lower at 20,975 while the S&P 500 ended the session 0.05% lower at 2,387. The Nasdaq was essentially flat, finishing Wednesday at 6,025.

“Generally you would expect a plan on something as complex as tax reform to take up more than a single A4 piece of paper,” said Michael Hewson, analyst at CMC Markets.

“The fact that it didn’t shouldn’t really have come as a surprise, yet there was still some disappointment about the lack of detail, and as with anything in politics, that’s where the devil will be, as US markets turned lower as the detail turned out to be more of a wish list.

The analyst added: “Markets had been hoping for more in the way of specifics, in particular the percentage level of the one-off profits tax, which it is hoped will prompt technology companies to repatriate the billions of dollars in profits currently held overseas, as well as some indications on timings, and how the cuts would be funded.

“These still appear to be some way off, and appear unlikely to go through this year, though we may get something on healthcare by the end of the month. In any case the effect on the US dollar is likely to be a negative one given that markets will have to wait a while longer for a repatriation boost.”

In Asia, Japan’s Nikkei was on the back foot, down 0.15% trading at 19,259.

Hong Kong’s Hang Seng, meanwhile, was in positive territory up 0.26% at 24,641, meanwhile the Shanghai Composite was slightly lower at 3,139.

Australia’s ASX 200 was moving positively, up 0.14% trading at 5,920.

Over in Europe the attentions are on the European Central Bank and Mario Draghi, before the his next guidance later today (at 12:45).

Today’s statement will most likely set the scene for future action, according to City Index strategist Kathleen Brooks.

“We don’t expect any change to policy, which makes the latter event more important from a market perspective,” she said in a note.

“To taper, or not to taper, that is the question yet again The key question for the financial markets is when will the ECB begin to taper and recalibrate its QE programme to reflect the pick-up in the Eurozone’s economic data?

“While we don’t expect any change to the ECB’s forward guidance at today’s meeting, or any announcement that the ECB will scale back its Asset Purchase Programme (APP), Draghi could take the first step at today’s meeting and set the stage to announce something bigger at the next meeting in June.”

Here in London, IG Markets is expecting a negative start for the FTSE 100. The CFD and spreadbetting firm sees the blue-chip benchmark starting about 30 points lower, calling it at 7,256 to 7,260 just over an hour before Thursday’s open.

CLICK HERE: For a daily round-up of all the Proactive news

City headlines

Car industry accelerates on weaker pound - Sky News

Oil rises as US crude stocks retreat for third week - Financial Times          

Swinton insurance to close 84 more branches and cut 900 jobs - The Guardian

Deutsche: Brexit risk to up to 4000 UK jobs - BBC News

Bank of Japan signals no early exit from stimulus - Financial Times

United Airlines 'saddened' by death of giant rabbit after transatlantic flight - The Guardian

Key Prices

GBP:USD – 1.2898

Brent crude – US$51.27

WTI crude – US$49.09

Gold – US$1,265 


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