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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.
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.
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In this guide to investment trusts, produced in association with Aberdeen Asset Management, we spoke to many of the leading experts in the field to find out more.
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Look up the shares
- Standard Chartered PLC (STAN.L)
- Barclays PLC (BARC.L)
- Royal Bank of Scotland Group PLC (RBS.L)
- Lloyds Banking Group PLC (LLOY.L)
- Aviva PLC (AV.L)
- Marks and Spencer Group PLC (MKS.L)
- Lonmin PLC (LMI.L)
- Imagination Technologies Group PLC (IMG.L)
- Cambian Group PLC (CMBNC.L)
- Old Mutual PLC
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- Surging Old Mutual and miners can't lift flagging FTSE
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