FTSE opens lower | Investors continue to eye ECB decision

<p>The FTSE 100 opened lower on Wednesday, trading at 5657, marking a loss of 14pts but in truth with 6.6pts being knocked off the FTSE […]</p>

The FTSE 100 opened lower on Wednesday, trading at 5657, marking a loss of 14pts but in truth with 6.6pts being knocked off the FTSE for ex-dividend factors, the UK Index was trading lower by around 8pts.

The FTSE 100 has now lost 3.5% in the last two week’s trading as investors scaled back positions after a strong run in the UK Index from the low’s of June, on heightened expectations of central bank stimulus plans. The recent losses however may open up a move to support levels of 5615 for the FTSE if the bearish moves seen from yesterday’s session continues, whilst with expectations of ECB action at high levels, the scope for disappointment is increased and this could weigh on share prices if Draghi fails to deliver on his ‘whatever it takes’ stance tomorrow. A break below 5615 on the FTSE could open up a longer term bearish move to the 5480 to 5460 levels.

Heavyweight stocks such as Diageo and BHP Billiton went ex-dividend this morning and these two stocks contributed to at least 4pts being knocked off the FTSE 100.

Eyes continue to focus towards tomorrow’s all important ECB decision, where Mario Draghi is expected to detail the central banks plans to buy stressed sovereign bonds to help lower the yields of Italian and Spanish bonds. Much of the near term sentiment in the market very much hinges on tomorrows announcement (or potential lack of announcement) from Mr Draghi and so to that end, there is an air of trepidation in the markets.

Yesterday’s session saw Indices sell off on the back of surprisingly weak US data but in truth, this merely gave investors the excuse to downsize risk ahead of tomorrow’s ECB decision and US non-farm payrolls release on Friday. Today see’s economic data continue to be released in full throw, with eurozone and German services PMI out just before 9am, whilst eurozone retail sales is also out at 10am and is expected to show a decline of 0.2% in sales for the embattled region.

Two stocks stood out in the early trade; Sports Direct and BP.

Sports Direct shares continued their run of good form to post more gains after reporting strong growth in sales and profits for the 13 weeks to 29 July. Total sales rose 25.3% to £519m whilst profits also grew by 20.4% to £211.1m as the discount sports retailer benefitted from shoppers looking for cheap goods and the pre-Olympics effect. Sports Direct shares have rallied over 47% so far this year alone, which marks an outstanding share price rally and outperforming most stocks in the sector.

BP shares however found pressure after the US Department of Justice claimed the firm was ‘grossly negligent’ for the Gulf of Mexico oil spill as the US attempts to ramp up rhetoric in an effort to see the firm pay higher costs for the spill. The rhetoric, and subsequent share price reaction today, is a reminder of the sensitivity this issue has on shareholders of the oil giant, who are inevitably concerned that the positioning of the DOJ could see BP’s costs escalate significantly. That uncertainty is the element which is weighing on the firms share price this morning.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.