FTSE 100 closes up 6 points
US indices up
Mario Draghi throws what little he can at the moribund Eurozone economy
5.20pm: FTSE 100 closes higher
FTSE 100 reversed from an earlier loss and finished marginally in positive territory on Thursday after a volatile session following the closely watched European Central Bank (ECB) meeting.
The UK’s blue-chip benchmark closed the day up 6.64 points at 7,344.67.
The mid-cap FTSE 250 fared worse though, closing 19.59 points lower at 19,962.57.
The ECB earlier announced new measures to stimulate the bloc’s struggling economy.
The refinancing rate was held steady at 0.0%, meeting forecasts, while the deposit rate was lowered to minus 0.5%, and a quantitative easing (QE) scheme of €20bn a month will kick off on November 1 for as long as needed.
“Mario Draghi, the head of the ECB, called for fiscal stimulus from governments again, and it is clear he feels that monetary policy can’t solve the eurozone’s problems alone,” noted David Madden, market analyst at CMC Markets.
On Wall Street, stocks were boosted by positive trade deal noises and decent economic data.
The Dow Jones Industrial Average added 129.37 points, while the S&P 500 advanced 13.48 points.
3.20pm: Footsie in red
The Footsie has dived into the red following the press conference given by Mario Draghi, the European Central Bank (ECB) president.
The FTSE 100 index was down 26 points (0.4%) after Draghi’s statement failed to convince the markets that the policy decisions announced today by the ECB would have the desired effect.
Draghi Shoots A Dud – Euro, Bunds Reverse All ECB Moves https://t.co/gBaNnQhFhS
— zerohedge (@zerohedge) September 12, 2019
“With the markets crying out for – and expecting – the red meat of big rate cuts and an espresso-like shot of QE [quantitative easing], Mario Draghi served up only the meanest of antipasti,” was the verdict of David Lamb, head of dealing at Fexco Corporate Payments.
“While the ECB’s monetary policy has been loosened significantly, the overall sense was that Mr Draghi has left the main course – and the dirty dishes – for his successor to sort out.
“The German economy is careering towards contraction and warning lights are burning bright as the Eurozone grapples with both weak growth and dangerously low inflation but the ECB chairman, who may yet go down in history as ‘the man who saved the Euro’ is approaching the end of his tenure in an increasingly timid vein,” Lamb continued.
“For Eurowatchers who had expected more, such timidity – set against an increasingly grim economic backdrop – is underwhelming and the Euro has tumbled as a result,” Lamb said.
Has Mario Draghi kitchen sinked his bazooka?
— Rory Gallivan (@RoryGallivan) September 12, 2019
Across the pond, where traders are more interested in US inflation, indices got off to a wobbly start but are now flying higher, with the Dow Jones up 109 points (0.4%) and the S&P 500 16 points (0.5%) firmer at 3,017.
The US consumer price index for August rose 0.1%, which was in line with consensus, while the core index rose 0.3%, which was above the consensus forecast of 0.2%.
“The third straight 0.3% core print raises y/y [year-on-year] core inflation to 2.4%, a pace last exceeded in September 2008, while the three-month annualised rate rose to 3.4%, a 13-year high,” commented Ian Shepherdson, the chief economist at Pantheon Macroeconomics.
“The outsized core increase came despite below-trend increases in primary and owner-equivalent rents, which account for 41% of the index and are likely to rebound over the next couple of months. Instead, the damage was done by a 1.1% jump in used car prices, the third straight hefty increase, and a 1.4% surge in hospital services costs, lifting the y/y rate to 2.1%, from 0.8% in July,” he added.
2.10pm: US markets tipped to open higher
US markets are tipped to open higher, giving a little extra boost to London’s idling Footsie.
The FTSE 100 was up 13 points (0.2%) at 7,352.
Across the pond, the Dow Jones was expected to open around 67 points firmer at 27,204 while the S&P 500 was tipped to put on just under 8 points to open its account at around 3,008.5.
“Wall Street found fresh support yesterday off the back of news that both Beijing and Washington were dialling back the latest round of tariffs on some imports, providing a degree of confidence for markets globally. This, combined with talk of the White House easing sanctions against Iran plus anticipation that the European Central Bank will launch significant stimulus measures in today’s policy statement is buoying sentiment although as Wall Street once again closes in on those record highs, the question has to be asked as to just how long the run of optimism will be,” said James Hughes at Axi Trader.
1.00pm: ECB returns to its limited armoury
The FTSE 100 limped back into positive territory after the European Central Bank (ECB) confirmed it would resume its asset purchase scheme.
The ECB also said it would cut its interest rate on the deposit facility by one-tenth of a percentage point – 10 basis points, in the jargon – to minus 0.50%.
Monetary policy decisions https://t.co/RbNs858lId
— European Central Bank (@ecb) September 12, 2019
The main refinancing rate and the rate on the marginal lending facility was left unchanged at 0.00% and 0.25%.
All of the ECB’s policy decisions announced this afternoon were in line with consensus expectations.
The FTSE 100 was up 10 points (0.1%) at 7,348.
“Markets initially reacted in a disappointing fashion to the news that the ECB has ‘only’ cut its deposit by 10bp, but as we type short-term yields and the euro are falling. That’s probably the right call. The details suggest that the central bank is going all in,” opined Claus Vistesen at Pantheon Macroeconomics.
“First things first, the ECB will re-start QE at €20BN per month, starting November 1st. The headline number is lower than the consensus, but the ECB is leaving the programme open-ended. Specifically, it says: ‘The Governing Council expects [QE] to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates’,” Claus reported.
“In short; the ECB is now going all-in on achieving what we think is a structurally unattainable inflation target,” Claus said.
European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports…. And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!
— Donald J. Trump (@realDonaldTrump) September 12, 2019
11.55am: Tumbleweed morning for equities
London’s leading shares continue to demonstrate all the dynamic vigour of a slug race filmed in slow-motion.
The FTSE 100 was down 2 points (0.0%) at 7,336, with traders hesitant to take positions ahead of this afternoon’s revelation of what, if anything, the European Central Bank (ECB) plans to do to inject life into the moribund Eurozone economy.
“The big event today is undoubtedly the ECB and whether [ECB governor Mario] Draghi is going to go out with a bang or a whimper,” declared Craig Erlam at Oanda.
“Everyone is convinced Draghi means business today and is packing the bazooka for one last showdown. Investors have high expectations with a rate cut, QE [quantitative easing] and tiered deposit rates expected, combined with all the technical adjustments that make it all possible.
“I can’t help but fear that investors have got a little ahead of themselves here. There are hawks on the board that have repeatedly questioned the need for stimulus and I question whether Draghi’s penultimate meeting as President is appropriate for such a huge package. Draghi isn’t shy of bold policy decisions though, as we’ve seen over the last eight years so who knows,” Erlam said.
The company said the supply/demand imbalance continues to be a significant challenge for the Irish housing market.
10.55am: Traders sit on their hands – those hands must be pretty numb by now
Traders are sitting on their hands ahead of this afternoon’s European Central Bank (ECB) meeting and subsequent press conference.
The Footsie was barely changed at 7,338.
“ECB day finds markets on edge ahead of the most important meeting for the eurozone’s central bank in over three years. The timing of today’s eurozone industrial data could not be better, for it underlines the growing malaise of the currency bloc, which is fighting the classic signs of a recession while trying to stave off a trade war with the US and manage the departure of the UK from the European Union. In such an environment, everyone outside the ECB (and probably inside too) is asking themselves, ‘what will another cut in rates really do?’. The answer is, of course, ‘not much’, and even a full-blown QE [quantitative easing] exercise will only buy the eurozone some time,” suggested Chris Beauchamp at IG Group.
RICS survey’s price expectations indicator fell back in July. Rough indicator of %y/y changes in average UK house prices 6-9 months(ish) ahead. Not gospel, but worth keeping an eye on. Given recent form, not currently suggesting any difference from the “bumping along” we’ve seen. pic.twitter.com/Iq3zQuO3xc
— Rupert Seggins (@Rupert_Seggins) September 12, 2019
In the UK, the Royal Institution of Chartered Surveyors (RICS) has released its latest report on the health of the housing market.
Out of every 100 surveyors and estate agents canvassed in August by RICS, the number of respondents expecting a drop in sales over the next three months exceeded by 23 those expecting a rise. In the July report, the balance was a more modest -4.
Pantheon Macroeconomics’ one-line summary of the RICS report was, “Depressed, but not knocked out, by Brexit uncertainty.”
“Strong wage growth and falling mortgage rates—the average quoted interest rate for a 75% LTV [loan-to-value] five-year fixed-rate mortgage has dropped to 1.92% in August, from 2.05% in January—are helping to shore up demand,” observed Pantheon’s chief UK economist, Samuel Tombs.
“Rising demand still looks set to put upward pressure on prices, given that the new sale instructions balance remained slightly below zero, while sale appraisals still are falling in year-over-year terms. As a result, we still expect the official measure of year-over-year growth in house prices to pick up to 2.5% in 2020, from 1.1% this year, provided a no-deal Brexit never materialises,” he added.
Out of the Footsie housebuilders, Persimmon PLC (LON:PSN), Taylor Wimpey PLC (LON:TW.) and Barratt Developments PLC (LON:BDEV) were little changed following the RICS release while Berkeley Group Holdings PLC (LON:BKG) was up 1.0%.
8.45am: Miners and Morrisons leads the Footsie higher
London’s index of leading shares has got off to the expected positive start, with supermarket chain Morrisons leading the way.
The FTSE 100 was up 15 points (0.2%), thanks largely to the strength of mining stocks.
WM Morrison Supermarkets PLC (LON:MRW), however, showed a clean pair of heels, even to the miners, after it announced it would pay a 2p special dividend as well as an improved interim dividend and also extended its existing relationship with online retailer Amazon.com.
The shares were up 3.8% at 201.3p.
“Given the hugely competitive sector in which Morrisons operates, this update must be seen as positive progress and has been warmly received. The hike in early trade is meaningful, but is far from overturning the deficit of a share price which has suffered a decline of 27% over the last year, as compared to a marginal 0.3% gain for the wider FTSE100, and which is down 14% in the last six months alone,” noted Richard Hunter at interactive investor.
On the futures market, Brent crude was up 10 cents at US$60.91 a barrel. The oil price had been under pressure following reports that US president Donald Trump is mulling relaxation of sanctions against Iran.
Proactive news headlines
Hurricane Energy Plc (LON:HUR) boss Dr Robert Trice declared himself delighted with the latest data from the Lincoln Crestal well which has flowed at rates of up to 9,800 barrels of oil per day in testing.
Alba Mineral Resources plc (LON:ALBA) is pleased with the ‘rapid progress’ being made at the Horse Hill oil project. At Horse Hill, now 85.635% owned by UKOG, final site work is complete ahead of the arrival of a drill rig for the project’s first horizontal well. First, a vertical pilot hole will be drilled, taking around 30 days, followed by the drilling of a horizontal section.
Silence Therapeutics PLC (LON:SLN) said it is well capitalised to carry out its “strategic objectives” as it reported its interim results.
Supermarket Income Reit PLC (LON:SUPR) has announced plans to raise £50mln through a share placing and offer for subscription to help fund the purchase of three assets worth a combined £140mln. It said all three assets are occupied by J Sainsbury PLC (LON:SBRY), providing “strong rental security over the longer term”.
Providence Resources PLC (LON:PVR) has moved to secure its financial future beyond the end of this month with a conditional share placing acting as a stop-gap as it continues to await the receipt of US$9mln as part of its farm-out of the Barryroe field.
7.00am: Brexit issues to be overlooked as market prepares for bright opening
The FTSE 100 is set to start Thursday on the front foot as political and economic factors, other than Brexit, have a positive impact for investor sentiments.
IG Markets sees the London benchmark rising around 37 points, making the price at 7,373 to 7,376 with just over an hour to go until the open.
Attentions are on the ECB policy meeting later today, with expectations for a loosening of monetary policy and further central bank support. At the same time, US-China trade relations remain a talking point and trading factor for investors.
Beijing now won’t impose extra tariffs on certain US imports and the US has delayed certain of its tariffs to 15 October, both pieces of news are positive for Asian markets.
With such commotion in the macroeconomy, it is perhaps unsurprising that commodities are also presently in focus – not that there aren’t political points of influence there as well.
“Oil sold-off sharply yesterday after it was revealed that President Trump discussed the possibility of easing sanctions on Iran. Earlier in the week, John Bolton left his role as National Security adviser, and it is believed he had a difference of opinion with Mr Trump on a number of matters, but the Iranian issue was believed to have been the final straw,” said David Madden, an analyst at CMC Markets.
“Gold clawed back some of its recent losses. The metal reached a six-year high earlier this month when stocks were in turmoil, but yesterday the commodity bounced back. Golds’ rally yesterday was all the more impressive given the move higher in equities and the rally in the greenback.”
Wall Street benchmarks were positive on Wednesday with the Dow Jones closing 227 points or 0.85% higher at 27,137 while the S&P 500 gained 0.72% to end at 3,000, the Nasdaq finished 1.06% higher at 8,169.
In Asia, Japan’s Nikkei rose by 225 points or 1.05% to trade at 21,823 and the Shanghai Composite gained 0.3% to 3,018, meanwhile, Hong Kong’s Hang Seng was down 0.26% at 27,089.
Around the markets
Pound: US$1.2327, up 0.01%
Brent crude: US$61.30 per barrel, down 1.76%
Gold: US$1,497 per ounce, up 0.2%
Bitcoin: US$10,095, up 1.19%