UK stocks rise as investors await BoE and ECB decisions; Morrison’s fails to impress
Fiona Cincotta November 8, 2012 5:07 PM
<p>Stock markets have seen a reversal from yesterday’s sharp losses – the worst daily performance for the FTSE since July. Investors are taking relief from […]</p>
Stock markets have seen a reversal from yesterday’s sharp losses – the worst daily performance for the FTSE since July. Investors are taking relief from the progress in Greece passing the Austerity Bill through Parliament, a strong Spanish bond sale, and are also looking for direction from the latest Bank of England and European Central Bank rate setting meetings later this morning.
In Europe the ECB is widely expected to be in a wait and see mood with regard to further monetary policy, even though the debt crisis is starting to affect the output of even core eurozone countries such as the powerhouse Germany. Economic data from the likes of Germany and France has been much weaker in recent weeks, signalling that the eurozone is losing ‘its major engine of growth.’ However, whilst Spain continue to resist requesting a bailout it is unlikely that we will see any further action in the form of bond buying from the ECB.
Spain has now completed the majority of its funding for the year and its borrowing costs have remained below the all-important 6% level, above which borrowing is considered unsustainable. It is mainly due to ECB President Draghi’s promise of further bond buying when Spain asks for help that has kept rates lower and whilst they are not rising too quickly, Prime Minister Rajoy will be happy to avoid the highly politically sensitive issue of requesting a bailout.
Meanwhile the Bank of England is unlikely to make any changes to current policy, maintaining the size of its asset purchase programme and keeping rates on hold. There had previously been chatter of a further injection of QE at this month’s policy meeting, but that view has since changed after the economy grew more than expected between July and September.
Turning to corporate news Morrison’s Supermarkets reported less than pleasing third quarter results, knocking 1% off the value of its share. The company reported that comparable sales were down 2.1%, with total sales down 0.4%. Despite these falls, which were blamed on a challenging environment, Morrison’s did say that they expect yearly performance to be in line with board expectations. Sector peer Tesco were not adversely hit by this news and climbed onto the top gainer board for the FTSE, up over 1.1%.
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.