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FTSE forges ahead as markets reassess ECB move

European markets recovered yesterday's losses as the scale of the European Central Bank's stimulus efforts began to sink in.

 
FTSE forges ahead as markets reassess ECB move

Markets have rallied after investors' initial shock at European Central Bank (ECB) president Mario Draghi's claim that yesterday's interest rate cut was likely to be the last subsided.

After the full weight of the central bank's stimulus efforts sank in the FTSE 100 jumped 98 points, or 1.6%, to 6,135 while in the eurozone, markets rallied even harder. The French CAC 40 was up 2.6%, the German DAX 30 rose 2.2%, Spain's Ibex added 2.8% and Italy's FTSE MIB rose 3.7%.

That reversed falls from yesterday when markets, having surged on the announcement of eurozone interest rate cuts and an expansion of the ECB's bond-buying quantitative easing (QE) programme, swung into losses after Draghi claimed the cuts were likely to be the last.

'While markets had a tantrum after Draghi's comment about "not seeing rates going further into negative territory' (this undid pretty much all of the initially positive reaction) we still see yesterday's announcement as net positive with potential for more QE and the targeted long-term financing operation offsetting negative rates to some extent and having genuine potential to boost eurozone growth and inflation,' said Mike van Dulken, head of research at Accendo Markets.

'The overnight recovery in market sentiment suggests markets may be coming round to a similar view, the ugly indigestion finally subsiding.'

On the FTSE 100, almost every single stock made gains, with banks and financial stocks racing towards the top of the index. Among the banks, Standard Chartered (STAN) rose 4.7% to 469.7p, Barclays (BARC) was up 3.8% at 166p, Royal Bank of Scotland (RBS) rose 3.6% to 229.7p and Lloyds (LLOY) added 2.1% to 70.4p.

Aviva (AV) was another strong riser, building on a rally yesterday on well-received results. The shares jumped 4.7% to 487.8p after analysts at UBS raised their target price on the insurer.

Only a handful of stocks were in the red. Old Mutual (OML) was down 2.5% at 180.8p as the financial services group announced plans to split into four businesses. The move had been anticipated, with reports of a bid for the group's UK wealth management business earlier this week, but there was no mentioned of an offer in the company's full-year results.

Marks and Spencer (MKS) meanwhile fell 2.1% to 3978p after analysts at Bank of America Merrill Lynch cut their rating on the stock to 'underperform', from 'neutral'.

The biggest moves were to be found among 'small cap' stocks. Lonmin (LMI) jumped 14.7% to 154.8p as analysts at Exane BNP Paribas upped their target price on the embattled miner, while Imagination Technologies (IMG) surged 11.5% to 181.2p on an upgrade from N+1 Singer for the chip maker.

Cambian (CMBNC) tumbled 14% to 70.5p as the health services group issued a profit warning and said it had agreed a temporary waiver on financial covenants with its lenders.

2 comments so far. Why not have your say?

Anonymous 1 needed this 'off the record'

Mar 11, 2016 at 18:10

Another short term fix... a small rally and then an eventual fall.

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snoekie

Mar 12, 2016 at 02:49

If only M & S were 3978p per share. If I sell on Monday, will I achieve that price, or will citywide make up the deficit? I would immediately go back into the market and buy at the market price.

However, as regards what Draghi is doing, only he knows, but he is procrastinating and obfuscating in the hope that something will happen which will get him out of the mess that he's got himself into.

There is no leadership on the new currency of the 4th Reich. It is now only a matter of a few months before the deluge of new immigration will cause more problems, for many of the countries, with probably more than half not agreeing to take on any extra numbers notwithstanding orders from Germany.

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Top 10 active investment trusts

by Jennifer Hill on Dec 02, 2016 at 07:14

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