Share investors brushed aside inaction from the European Central Bank and took their cue from company earnings releases and US data to rally for a second day.
‘We are willing and we are ready to act,’ promised Mario Draghi, even as the European Central Bank he leads resisted any change to its monetary policy, defying some expectations of further efforts to boost the euro bloc economy.
The euro leapt, up 0.56% to $1.3603, as investors lamented that the bank was merely kicking the can down the road again. The ECB still expects a gradual recovery and a prolonged period of low inflation, Draghi said.
‘In our view, only a significant increase in money market tensions and/or a worsening of the medium-term inflation outlook will trigger further action’, summed up Carsten Brzeski of ING Bank.
The pound saw no such action, unmoved at $1.6318 after the Bank of England also kept its monetary policy stance unchanged. The bank didn’t offer any updates on its forward guidance policy, under which it will consider raising rates once unemployment falls to 7%. The unexpectedly rapid decline in unemployment to 7.1% means the City expects Bank governor Mark Carney to backtrack on his plans, possibly revealing a change of heart in next week’s inflation report.
Stock markets seemed happy enough with the outcome of the day’s monetary policy dabbling though, with the FTSE 100 rallying 1.5% higher to 6,550, matching gains on the pan-European Eurofirst 300, and ahead of a 0.7% rise for the US S&P 500.
Emerging markets – the source of much market angst so far this year – fared better too, with Brazil’s Bovespa rallying 2.2%.
A report showing US claims for unemployment benefits declined last week helped the mood on equity markets.
Vodafone was the top riser, up 3.6% at 224p (see morning report).
Vodafone, Hargreaves at forefront of FTSE rally (10:15)Vodafone was among the top risers on a resurgent FTSE 100, as investors looked on the bright side ahead of major central bank policy decisions today and US jobs data tomorrow.
Lagging other European indices slightly, the UK’s benchmark listing was up 0.6% at 6,495, heading for its second day higher after five straight days of losses.
The European-wide rally comes amid growing expectations that the European Central Bank may at least hint at new policy measures today, if not actually put them into motion this month. The Bank of England on the other hand is unlikely to do anything new.
Company earnings reports were also providing a lift to markets, that seem to have at least temporarily put aside their jitters over the state of emerging economies as US monetary policy is reduced.
In London Vodafone reported a 4.8% decline in organic service revenue in the three months to the end of December. But despite still ‘difficult’ conditions in Europe, chief executive Vittorio Colao was ‘optimistic’ that revenues would improve.
That was enough for most investors, who pushed the shares up 2.9% to 222p. But some City scribblers remained downbeat after 18 months of falling revenues at Vodafone.
We further remain concerned that VOD still faces competitive threats across many of its European markets,’ commented Robert Grindle, an analyst at Espirito Santo, who would ‘prefer to see the shares cheaper before becoming more positive’.
Hargreaves Lansdown recovered some of Wednesday’s sharp share price fall, rising 2.7% to £13.82. the financial services provider had yesterday reported a dip in profit margins, alongside a decision to repeal a proposed charge for customers with investment trusts.
Jason Streets, an analyst at Jefferies, downgraded Hagreaves from ‘buy’ to ‘hold’.
‘HL's shares have performed strongly as the market has become more comfortable about RDR2….Nevertheless there is no longer sufficient upside for a Buy
‘Before we become more positive again on the shares we would like to see that customer acquisition growth is not impacted by the price changes.
Not all the corporate news was good. AstraZeneca fell 3% to £37.60 after forecasting worse declines in profits and sales than analysts had been expecting.
And overnight Twitter, which listed on the stock market to much fanfare three months ago, reported a loss of $654 million for 2013.