Sports Direct Share News (SPD)

LONDON (Alliance News) - Stocks in London ended slightly higher on Thursday, as the European Central Bank surprised the market by easing the pace of its monthly asset purchases but extending the end date of the programme to December 2017.

The central bank said asset purchases of EUR80 billion a month will run until March next year, but decided to reduce the size after that point to EUR60 billion a month until December 2017 or beyond if necessary. The market had expected the ECB to extend its QE programme to September 2017 from March 2017 and maintain the pace at EUR80 billion a month.

The ECB made no changes to its key interest rates.

In the press conference that followed the announcement, President Mario Draghi added that the Governing Council adjusted the parameters of the asset purchase programme. This included broadening the maturity range of the public sector purchase programme by decreasing the minimum remaining maturity for eligible securities from two years to one year.

The bank also allowed the purchases of securities with a yield to maturity below the ECB's deposit rate of -0.4%. Draghi said purchases below the deposit rate was an option and not a necessity. The changes will come into effect from January.

The market initially could not make up its mind about the ECB's new measures. The euro initially spiked against the dollar on the perception that the ECB had begun tapering its quantitative easing programme but dived almost immediately after.

When questioned by journalists, Draghi emphasised that the ECB is not tapering QE and tapering was not discussed by the Governing Council during the meeting. The President clarified that tapering is when asset purchases were wound down to zero, something which has not been on the table.

Maintaining a "sustained presence in the market is a key message from today," Draghi said.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said that the ECB's decision was more dovish than the market expected. He said while the headline reduction in the pace of QE was disappointing, the rest of the message was "very dovish".

"Not only did the ECB extend QE for longer than the market expected, but the language surrounding this extension was very dovish," Vistesen said.

"Draghi repeated several times that tapering - ie gradually reducing purchases to zero - was not discussed and emphasised that risks to adjustments are asymmetric. In other words, the ECB is more likely to increase the pace of QE and to extend it further than to wind it down," the economist said.

Holger Schmieding, chief economist at Berenberg, believes the move made by the ECB was neither dovish nor hawkish, but "simply makes sense".

"Seen from a broader angle, the ECB today simply took back the increase in the size of monthly purchases which it had decided last March in reaction to widespread – if overdone – deflation concerns. As deflation risks have receded, the extra stimulus employed to counteract such risks is no longer required," Schmieding said.

The Berenberg economist added that the EUR60 billion a month asset purchases will be enough to keep the eurozone recovery on track.

At the European equities close, the euro traded the dollar at USD1.0620, having hit an earlier high of USD1.0874. At the close on Wednesday, the euro was at USD1.0749.

The pound traded the dollar at USD1.2564 at the close on Thursday, compared to USD1.2606 at the same time on Wednesday.

The FTSE 100 ended the day up 0.4%, or 29.32 points, at 6,931.55, extending its run of gains to four consecutive sessions. The FTSE 250 closed up 0.3%, or 56.46 points, at 17,681.99, and the AIM All-Share ended down 0.26 point, at 813.19.

The BATS UK 100 rose 0.5% to 11,721.25, the BATS 250 ended up 0.3% at 16,067.09, and the BATS Small Companies closed up 0.1% at 10,276.06.

In Europe, the CAC 40 in Paris ended up 0.9% and the DAX 30 in Frankfurt up 1.8%.

In New York at the London close, the Dow 30 was up 0.1%, the S&P 500 was flat and the Nasdaq Composite was up 0.4%. All three indices managed to reach new record highs in early trade.

In UK corporate news, Capita ended as the biggest faller in the FTSE 100, down 13%, and hitting its lowest price since July 2006. The outsourcer cut its profit forecast for 2016 again, as it outlined plans for a sale of some of its businesses in an attempt to combat difficult market conditions that it now expects to continue into 2017.

In a pre-close trading update, Capita said it now expects 2016 profit to be GBP515.0 million, lowered from previous guidance of GBP535.0 million to GBP555.0 million, due to a slowdown in client spend and issues in its IT Enterprise Services division. Capita forecast revenue of around GBP4.80 billion for 2016.

The downgraded profit forecast comes after Capita already cut its profit expectations in September.

WPP was one of the biggest gainers in the blue-chip index, up 2.8%, after Jefferies upgraded the media buying giant to Buy from Hold. Jefferies believes the reported US Department of Justice investigation into bid rigging by advertising agencies will have a limited impact on WPP. The broker also raised its revenue forecasts for WPP due to better contributions from acquisitions.

Shares in bookmaker William Hill ended down 7.1%, and peer Ladbrokes Coral Group fell 8.2%.

A cross party group of MPs called on the UK government to "significantly" reduce the maximum stakes on fixed-odds betting terminals to GBP2.00 from GBP100.

In a report which has been submitted to the UK Department for Culture, Media & Sport, the Fixed Odds Betting Terminals All Party Parliamentary Group said the case to reduce the stakes is supported by "many members" of parliament and, evidence suggests, a "significant majority" of the public.

In addition, the cross party group said the UK government should also consider reducing the speed of spin on fixed-odds betting terminals to "reduce the potential for harm to be caused" and also review the number of terminals permitted for an individual bookmaker.

Sports Direct International closed down 7.8% following a slew of news, as the sports clothing and equipment retailer reported a fall in interim profit, which declined by a quarter due to provisions and the weak pound.

Sports Direct also said it has paused its share buyback programme and has appointed a new non-executive director to its board. Meanwhile, a probe into Sports Direct's 2015 accounts was closed by the UK's accounting watchdog.

Brent oil slid slightly on Thursday to trade at USD53.45 a barrel at the London stock market close, compared to USD53.59 at the same time on Wednesday.

Gold also edged lower, trading at USD1,170.57 an ounce at the close Thursday from USD1,176.28 on Wednesday.

In the economic calendar for Friday, Chinese consumer and producer price indexes are before the London open at 0130 GMT, as are German trade balances are at 0700 GMT. The Bank of England's consumer inflation expectations survey results are at 0830 GMT and UK goods trade balance are at 0930 GMT. Later in the day is the Michigan consumer sentiment index for the US at 1500 GMT, US wholesale inventories are also at 1500 GMT, and the Baker Hughes US oil rig count is at 1800 GMT.

In the UK corporate calendar, there are trading statements from infrastructure project manager John Laing Group, concrete paving maker Marshalls, and recruiter SThree. Photo booths operator Photo-Me International reports interim results.

By Neil Thakrar; neilthakrar@alliancenews.com; @NeilThakrar1

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