- ECB becomes first major central bank to take deposit rate negative
- Balance of votes on MPC may soon shift, Barclays Research says
- Asos plummets
- Smith & Nephew jumps on continued M&A speculation
techMARK 2,824.79 +0.08%
FTSE 100 6,813.49 -0.08%
FTSE 250 15,995.49 +0.06%
UK equities underperformed their continental European counterparts slightly on Thursday, despite an historic reduction in the European Central Bank's (ECB) deposit rate into negative territory - the first ever for a major central bank.
Despite the announcement of several new measures to goad lending in the single currency area market participants were not overly impressed, harbouring doubts about the effectiveness of the new measures. The monetary authority seemed to still be treading cautiously, although it did leave the door wide open to further more assertive measures, including asset purchases.
Even so, analysts at Capital Economics had this to say: "The ECB unveiled an array of policies to boost bank lending and counter deflationary risks today. But there are uncertainties over how effective these policies will be. And while it is good news that the Bank is preparing a programme of asset purchases, the likely size and timing remains unclear at best."
More specifically, some analysts expressed dissatisfaction with the amount of the new targeted liquidity measure for lenders, which will make €400bn in fresh funds available to European lenders.
Change is in the air at Bank of England
In parallel, the Bank of England's Monetary Policy Committee decided to keep Bank Rate steady at 0.5% and the amount of assets purchased under its asset purchase programme unchanged at £375bn. Nevertheless, change is in the air according to analysts at Barclays Research, who wrote to clients saying that: "However, we expect the balance of votes on the Bank Rate decision to change soon, as some MPC members have already started to display more hawkish views."
Acting as a backdrop, overnight the HSBC Chinese services sector purchasing managers' index for the month of May fell back to a reading of 50.7 from 51.4 for the month before.
ASOS plummets on profit warning
Shares in online fashion retailer ASOS plummeted as much as 40% after the company cut its margin guidance for the full year and blamed a strong pound for a slowdown in growth in the third quarter. The company said that because of a higher mix of UK and European sales, which have lower retail margins, together with increased promotions, its operating margin for the current financial year would be 4.5%, down from its previous forecast of 6.5%.
The surprise trading statement saw shares
in fellow retailers Next, Sports Direct, N Brown, SuperGroup and Primark owner Associated British Foods lower, while boohoo.com, the online fashion group which floated in March, was down around 10%.
Johnson Matthey, which makes catalytic converters for cars, reported higher sales and profits and hiked its dividend, but the share price fell as it warned that changes in a deal with a supplier and currency volatility would hit growth in 2014/15.
Leading the upside during much of the day was Smith & Nephew which jumped around 5% as M&A speculation continues to surround the medical devices manufacturer. US group Medtronic has become the latest party rumoured to be interested in the UK firm and is reportedly in the early stages of preparing an offer.
The numbers of passengers flying with budget airline easyJet rose 7.9% in May compared to the same month last year, helping the stock higher in morning trade.
Meanwhile, insurance stocks were putting in a decent performance with Admiral, Friends Life, Aviva and Old Mutual among the best performers.
UK residential property developer Bellway rose after saying that demand for new homes remained robust, buoyed by growing consumer confidence and a strong supply of mortgages. Sector peer Persimmon, however, was a heavy faller today.
FTSE 100 - Risers
Meggitt (MGGT) 517.00p +4.63%
Smith & Nephew (SN.) 1,088.00p +2.26%
Ashtead Group (AHT) 918.50p +2.06%
United Utilities Group (UU.) 881.50p +1.56%
CRH (CRH) 1,682.00p +1.51%
Old Mutual (OML) 202.00p +1.41%
Aberdeen Asset Management (ADN) 445.80p +1.39%
BG Group (BG.) 1,240.00p +1.39%
Friends Life Group Limited (FLG) 318.20p +1.34%
Admiral Group (ADM) 1,489.00p +1.15%
FTSE 100 - Fallers
Persimmon (PSN) 1,260.00p -5.41%
Royal Mail (RMG) 498.60p -3.09%
Burberry Group (BRBY) 1,493.00p -2.67%
ARM Holdings (ARM) 893.00p -2.40%
Rexam (REX) 533.00p -1.84%
Imperial Tobacco Group (IMT) 2,641.00p -1.53%
Petrofac Ltd. (PFC) 1,233.00p -1.44%
TUI Travel (TT.) 404.40p -1.32%
Weir Group (WEIR) 2,595.00p -1.29%
Barclays (BARC) 239.75p -1.28%
FTSE 250 - Risers
Imagination Technologies Group (IMG) 251.00p +6.63%
Rathbone Brothers (RAT) 2,168.00p +4.73%
AL Noor Hospitals Group (ANH) 1,044.00p +3.78%
Inmarsat (ISAT) 736.50p +2.51%
Bellway (BWY) 1,439.00p +2.42%
Ted Baker (TED) 2,029.00p +2.42%
Dechra Pharmaceuticals (DPH) 706.00p +2.02%
UDG Healthcare Public Limited Company (UDG) 358.90p +1.96%
Petra Diamonds Ltd.(DI) (PDL) 167.00p +1.89%
Evraz (EVR) 98.00p +1.87%
FTSE 250 - Fallers
Bank of Georgia Holdings (BGEO) 2,359.00p -3.87%
Xaar (XAR) 790.50p -3.30%
Brown (N.) Group (BWNG) 454.00p -3.24%
Redrow (RDW) 259.20p -2.85%
Tullett Prebon (TLPR) 279.30p -2.82%
IP Group (IPO) 178.50p -2.78%
RPS Group (RPS) 288.10p -2.34%
Micro Focus International (MCRO) 820.50p -2.21%
Debenhams (DEB) 72.90p -2.15%
Cairn Energy (CNE) 200.40p -2.10%