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London open: Stocks rise ahead of ECB announcement; Aviva job cuts in focus
London stocks rose in early trade on Thursday but gains were muted ahead of the latest policy announcement from the European Central Bank and as ex-dividends took their toll.
At 0825 BST, the FTSE 100 was 0.2% firmer at 7,235.15, while the pound was down 0.1% against the dollar and the euro at 1.2680 and 1.1294, respectively.
The ECB rate decision is at 1245 BST, but with no change to policy expected, all eyes will be on Mario Draghi’s press conference at 1330 BST.
CMC Markets analyst David Madden said: “In light of the sizeable drop off in inflation, traders will be expecting more details about the new targeted lending scheme that is planned to begin in September.”
Danske Bank said it expects the ECB to maintain its easing bias, with no new additional stimulus measures announced.
“The update of the staff projections is unlikely to change much for inflation, but we see a downside risk to the 2020-21 growth forecast from its already low level. We will also get more information on the TLTRO3 terms, which we expect to be favourable in light of the ongoing struggles of the economy.”
Elsewhere, trade talks between the US and Mexico were due to resume on Thursday after US President Trump tweeted that progress was being made “but not nearly enough”.
“If no agreement is reached, tariffs at the 5% level will begin on Monday, with monthly increases as per schedule,” Trump tweeted on Wednesday. “The higher the Tariffs go, the higher the number of companies that will move back to the USA!”
Despite the positive tone in markets, Neil Wilson, chief market analyst at Markets.com, said the rally “looks very uneasy”.
“Indeed risk assets are still very much at the mercy of Donald Trump and various trade threats and recession fears are weighing on sentiment. There is a lot of noise to contend with. We’re at a ‘bad news is good news’ point now for stocks as markets turn back to their old habit of requiring weaker data to push up expectations for stimulus.”
In London’s equity markets, Aviva gained ground after the insurer said it was planning to cut around 1,800 jobs as it looks to reduce expenses by £300m a year over the next three years.
Rolls-Royce pushed higher as it announced that its pension scheme has agreed to transfer £4.6bn of assets to Legal & General in what is the UK’s largest ever bulk annuity.
AstraZeneca advanced after saying that its blood cancer drug met the primary endpoints of a final stage trial.
Entertainment One surged as it denied speculation that Mark Gordon was leaving his role as president and chief content officer. The independent producer said “Gordon continues to be a part of the eOne team both now and into the future”.
On the downside, ex-dividends were a drag, with Taylor Wimpey, Sainsbury, Kingfisher, Vodafone, Johnson Matthey, AJ Bell, AB Foods, LondonMetric Property, Synthomer, Victrex, Marshalls, Renew Holdings, SIG and SSP all in the frame.
Auto Trader skidded lower as it posted a 15% jump in annual profit but said the market is still challenging.
In broker note action, EI Group was cut to ‘hold’ at Berenberg, but Mitchells & Butlers was upgraded to ‘buy’ as it took a look at the UK pub sector.
