ECB and BOE leave rates unchanged. Rolls Royce tumbles on corruption news

<p>European shares started the day slightly higher, tracking the positive finish on Wall Street last night. Investors looked towards the rate decisions due from both […]</p>

European shares started the day slightly higher, tracking the positive finish on Wall Street last night. Investors looked towards the rate decisions due from both UK and Europe to guide their trading.

The ECB kept its main interest rate unchanged at 0.75%, in line with consensus. However, the bank went on to cut its economic and inflation forecasts, with Draghi stating that weak activity is expected to extend into next year. Although, he also said that he expected economic activity to gradually recover as global demand strengthens and the monetary policy and market confidence work their way through the economy. The ECB now forecasts the economy will shrink 0.5% this year instead of the 0.4% predicted and next year sees a contraction of 0.3% instead of 0.5% growth. However, given the possible risks that still exist on the horizon for the Eurozone a contraction of only 0.3% seems fairly optimistic.

Despite this gloomy news the markets across Europe managed to remain in positive territory for the penultimate trading session of the week. The FTSE closing just above the important psychological level of 5900 by a whisker whilst the DAX outperformed other European markets closing up 1.12%.

Here in the UK it was the mining sectors which propped up the FTSE after metal prices found support from the news that England’s Policy Committee decided to maintain the bank rate at 0.5% and left its asset purchase programme unchanged at £375 billion. Antofagasta gained over 3% and Eurasian Natural Resources over 2%.

On the downside, investors sent Rolls Royce lower in trading today following a revelation by the company that it had passed over information to the Serious Fraud Office relating to concerns about corruption and bribery involving overseas intermediaries was discovered in Indonesia and China. The shares dropped over 3.2%, the biggest faller on the FTSE 100 as investors showed how important credibility is right now when deciding where to invest their money; especially given the recent problems with the banks and their lack of credibility.

Looking towards tomorrow the US non-farm payrolls will be the main focus of the day, however, UK industrial production and manufacturing data will also be keenly watched.

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