LONDON MARKET MIDDAY: Stocks Lower With ECB Set To Take Centre Stage

LONDON (Alliance News) - Stocks in London were lower at midday on Thursday following hawkish tones from the US Federal Reserve on Wednesday, as investor focus shifts to the continent for the European Central Bank's imminent interest rate decision. The FTSE 100 index was down 0.6%, or 36.39 points, at 7,667.32 at midday Thursday. The mid-cap FTSE 250 index was down 0.3% at 21,169.30. The AIM All-Share index was down 0.1% at 1,101.10.The Cboe UK 100 was down 0.6% at 12,993.55, the Cboe UK 250 was down 0.3% at 19,356.26, and the Cboe UK Small Companies was down 0.3% at 12,885.62."Four rate hikes for 2018 does not necessarily suggest that the end of the great bull market is at hand, but it has been enough to knock equities back this morning. After years of stasis in central banks, the developments are coming positively thick and fast. Jerome Powell's Fed is clearly happy with the situation, feeling confident enough to knock the pace up a notch, and later today we will see if the ECB are in the mood to make a few changes too," said IG chief market analyst Chris Beauchamp.In Paris the CAC 40 was down 0.2%, while the DAX 30 in Frankfurt was down 0.2%. The euro was higher at USD1.1828 at midday, against USD1.1773 at the European equities close Wednesday, as investor wait to find out if the European Central Bank will make a decision about its stimulus program.The central bank will announce its interest rate decision at 1245 BST in Riga, Latvia, followed by a press conference with President Mario Draghi. Economists expect the bank to keep its main refi rate at a record low of 0% and the deposit rate at -0.40%.Analysts expect to see the ECB begin to wind down its stimulus programme as inflation moves in line with the central bank's target. "The ECB is expected to provide some verbal cues that it will taper in the fourth quarter with an eye toward stopping at year end. However, Draghi will likely be at pains to say that other elements of the extraordinary monetary policy will continue well past the end of the purchases. We continue to pencil in the first hike around the middle of next year," said analysts at Brown Brothers Harriman."Whilst the ECB is likely tread even more carefully later, it can scarcely avoid flagging the QE exit after trailing the move so clearly earlier in the month. A retreat to safety, with European markets having joined the sea, could remain the order of the day till ECB news and beyond," added City Index's Ken Odeluga.On the data front, German consumer price inflation climbed 2.2% year-on-year in May, faster than the 1.6% increase in April but in line with the estimate published on May 30, final data from Destatis showed.On the London Stock Exchange, Rolls-Royce Holdings was the best blue chip performer at midday up 3.1% after the jet engine maker announced plans to cut around 4,600 corporate and support jobs, predominantly in the UK, as part on a new business restructuring plan to save GBP400 million annually by end of 2020. Rolls-Royce, which in January announced a plan separate the business into three different units, expects the new restructuring programme to deliver improved returns, higher margins and increased cash flow. Under the restructuring programme, the company aims to remove corporate management layers, complexity and duplication, including within its core engineering division, and replace a centralised decision and control structure by empowered business units having clearer accountabilities, and decision-making powers. The total cash cost of the restructuring programme is expected to be around GBP500 million, which will be incurred across 2018, 2019 and 2020."Reducing costs is typically applauded by shareholders as it tends, in the short-term at least, to boost the profit and cash flow of which they are part owners. Although it will be little compensation to those affected, it would be inaccurate to describe this as a slash and burn exercise by Rolls-Royce management," said AJ Bell's Russ Mould. At the other end of the large cap index, Persimmon and Severn Trent were down 3.9% and 3.8% respectively after the stocks went ex-dividend. This means new buyers no longer qualify for the latest payout. RELX was down 3.7% after UBS cut the Anglo-Dutch business information and events company to a Sell rating from Neutral.Pearson was down 2.7% after Barclays downgraded the education publisher to Underweight from Equal Weight saying the shares offer limited upside and raised concerns over its North America business.In the FTSE 250, AVEVA Group was the best performer up 13% after the electrical and industrial software provider reported a combined group pro forma pretax profit of GBP64.6 million for the year to the end of March, down from GBP98.3 million, on a revenue of GBP704.6 million and GBP648.7 million, respectively. This followed the recent combination with the software arm of France's Schneider Electric. Group profit, before tax and adjustments and on pro forma basis grew to GBP162.8 million from GBP152.4 million. The pro forma results include results for both heritage Schneider Electric Industrial Software Business and heritage AVEVA for the 12 months to March end, as well as for the comparative period. At the other end of the midcaps, PZ Cussons was the worst performer down 5.8% after the personal care products maker said Nigerian wages have continued to lag behind "significant cost inflation" in recent years, impacting most of PZ Cussons' Nigerian portfolio. As such, PZ Cussons expects pretax profit at the low end of its GBP80 million to GBP85 million guidance announced back in March. In financial 2017, pretax profit was GBP88.0 million. The company also struggled in the UK with product launches failing to make up for margin and volume shortfallThe pound was higher against the dollar at USD1.3422 at midday, compared to USD1.3370 at the London equities close Wednesday, following positive UK retail sales data.UK retail sales growth accelerated more than expected in May, figures from the Office for National Statistics revealed. Retail sales volume including auto fuel, grew 1.3% month-on-month, following April's 1.8% increase. This was the second consecutive rise in sales and much bigger than the expected 0.5%. Sales excluding auto fuel, climbed 1.3% versus 1.4% increase a month ago. Sales were expected to gain 0.3%. The ONS said feedback from retailers suggested that a sustained period of good weather and Royal Wedding celebrations encouraged spending in food and household goods stores in May."The hottest May on record and the royal wedding have certainly played a part in the continuing retail sales rebound, but after such a tough start to the year it's too soon to say whether this is a real return to health for the sector," said Vincent Reboul, managing director at Hitachi Capital Consumer Finance.Stocks in New York were set for a flat to lower open as investors digest an interest rate hike from the US Federal Reserve on Wednesday. The DJIA and the S&P 500 was called flat, while the Nasdaq Composite was called down 0.1%.On Wednesday, the US Federal Reserve raised its benchmark interest rate to a range of 1.75% to 2.00%, in line with expectations, as unemployment declines and inflation moves to the desired target. The vote of the Federal Open Market Committee was 8-0. The quarter-of-a-percentage-point hike is the second time this year the Fed has increased the rate and comes as the labour market continues to strengthen and economic activity rises at a solid rate. "The main takeaway is that the economy is doing very well. Most people who want to find jobs are finding them and unemployment and inflation are low," Chairman Jerome Powell said. In a surprise move, the central bank now projects four interest rate hikes in 2018, rather than three. As for economic growth, Powell said it appeared to have picked up in the current quarter largely reflecting a bounce back in US household spending, but he also credited current fiscal policy for boosting the economy, saying ongoing job gains are raising incomes and confidence.Still to come in the economic calendar are US retail sales at 1330 BST.