FTSE flat ahead of ECB decision

AFP

File photo.

Britain's leading share index was flat in early deals on Thursday, as investors paused ahead of expected moves by the Bank of England and the European Central Bank, which both announce monetary policy decisions later in the day.

Risk-sensitive energy stocks and banks were the main drag on sentiment, having led a previous rally on stimulus measure hopes, with defensively-perceived stocks such as drugmakers and tobacco firms providing the counter balance as investors' risk appetite waxed and waned.

The BoE's Monetary Policy Committee, due to announce its decision at 1100 GMT, is expected to leave interest rates unchanged at a record low of 0.5 percent.

But the British central bank is expected to revive its quantitative easing programme with 50 billion pounds of fresh cash to take the total to 375 billion pounds in a bid to kick-start the flagging British economy just two months after calling a halt to the programme.

The European Central Bank announces its latest policy decision at 1145 GMT, with the bank widely expected to cut interest rates to a new record low of 0.75 percent, and some economists saying it may take more emergency measures soon to placate financial markets.

At 0747 GMT, the FTSE 100 index was up 0.58 points, or 0.01 percent, at 5,685.05, having shed 0.1 percent on Wednesday to snap a three-session rally of around 2 percent.

Technically, the FTSE has reached an important price target, with a major retracement zone formed at 5,609.45 to 5,699.05.

“Wednesday's move to 5,699.85 tested the upper boundary of this range. This could prove to be a key pivot price over the next few days as the market will either breakout above this price or fall back into support,” said James A. Hyerczyk, analyst at Autochartist.

“The first price that bullish investors will try to defend is a key level at 5,667.80. The second is the 50 percent retracement price at 5,609.45. Sustained moves under the lowest level will mean that sentiment is turning bearish.”

GKN SOARS

GKN was easily the top blue-chip gainer, jumping 12.5 percent higher after the engineer agreed to buy the aerospace division of the world's number two truck maker Volvo for 633 million pounds ($986 million).

The deal will be funded by new debt and a placing of 140 million pounds, representing around 5 percent of GKN's current market capitalisation.

“The deal has happened a fraction earlier than we anticipated but a cracking price of 633 million pounds and a placing of just 5 percent. Our assumption was 700 million pounds and 10 percent,” said Oriel Securities analyst Harry Philips.

Food ingredients firm Tate & Lyle was also a blue chip riser, ahead 1.5 percent as Exane BNP Paribas upgraded its rating to “outperform” from “neutral”.

But an opposite broker move weighed on gas distributor Centrica, down 1.0 percent, with Goldman Sachs downgrading the stock to “neutral” from “Conviction Buy”.

Ahead of the BoE rate decision, no important British economic data will be released on Thursday, but across the Atlantic, a trio of pointers will provide signals for Friday's key U.S. June jobs report, the next big focus once the central bank decisions are out of the way.

June Challenger layoffs is due at 1130 GMT, ADP National Employment for June scheduled for 1215 GMT, and the latest weekly initial jobless claim numbers are released at 1230 GMT. -Reuters