London midday: Stocks flat ahead of ECB policy announcement

London stocks were flat on Thursday as UK retail sales data missed forecasts and as investors awaited the European Central Bank’s policy decision.

Data for September from the Office for National Statistics showed UK retail sales were flat compared to August, an improvement from the 0.3% fall a month ago but short of a 0.2% rise expected by economists.

The headline year-on-year growth figure showed a 4.0% increase, down from the 6.2% revised gain from previous month and short of the consensus forecast of 4.4%.

For the third quarter as a whole, retail sales rose 1.88%, which was the best quarter since the end of 2014.

Economist Howard Archer at IHS Markit said quarterly growth fuelled the belief that the consumer played a leading role in the apparent resilience of the economy following June’s Brexit vote, but saw conflicting forces at play in the disappointing September numbers.

He said the flat retail sales "could be a sign that consumers are starting to rein in their spending as inflation rises", but accepted the effect of warm weather on demand for autumn clothing and higher clothing prices.

The attention now turns to the ECB’s policy announcement at 1245 BST and President Mario Draghi’s press conference at 1330 BST. Analysts expect no change to key rates or the quantitative easing programme but they will be looking to the press conference for clues on the ECB’s next move.

Many predict the ECB will expand QE at the December meeting when new economic forecasts become available.

“The ECB is currently facing issues with its quantitative easing program as the current structure of it means the pool of German debt available for purchase is fast running out,” said Oanda’s Craig Erlam.

“Mario Draghi indicated at the last meeting that the central bank is looking at solutions to this, which would possibly involve changing the composition of debt it must purchase, the yields it can accept or the type of debt it can target, among many other things. As it stands, the QE program is scheduled to run until March, at which point a solution will have to be found or the ECB may be forced to begin tapering its QE programme, an outcome that would be extremely undesirable for the markets and potentially damaging to the eurozone recovery.”

Meanwhile, oil prices retreated following a strong rally in the previous session after data from the US Energy Information Administration showed a surprise 5.2m drawdown in crude inventories to 468.7m barrels last week and amid growing expectations of an OPEC-led production cut.

Brent crude dropped 1.07%% to $52.11 per barrel and West Texas Intermediate declined 1.09% to $51.26 per barrel at 1158 BST.

On the company front, airline stocks were given a boost on a positive read-across from a surprise full-year profit target rise by Lufthansa. International Consolidated Airlines and easyJet rallied.

Banking stocks were higher as data showed UK gross mortgage lending reached its highest point in September since before the financial crisis hit in 2007.

CML estimated that gross mortgage lending reached £20.5bn in September this year, the highest it has been since September 2007. Compared to September 2015 the figure is 2% higher but compared to the previous month it is 7% lower.

Shares in Barclays, Lloyds Banking Group and Royal Bank of Scotland gained.

Anglo-Swiss miner Glencore ticked lower after announcing plans to sell its rail coal haulage business in the New South Wales Hunter Valley for $1.14bn to Genesee & Wyoming Australia.

Ground engineering company Keller tanked as it cautioned that its full-year 2016 underlying results will be around 15% below current market expectations, mainly due to underperformance in the Asia Pacific division.

Shares in cyber security and risk mitigation group NCC Group nosedived after it warned that profits growth will be hit by "a number of setbacks" in its assurance division that included the cancellation of three large contracts the deferral of another and delays with other contract renewals.

Homeserve advanced as Barclays upped the stock to ‘overweight’ from ‘underweight’ and boosted the price target by a whopping 170% to 695p after visiting the company’s UK and US operations in the last couple of months.

International Personal Finance surged after it posted a trading update for the third quarter, with 9% growth in credit issued for the three months to 30 September.

Market Movers

FTSE 100 (UKX) 7,021.15 -0.01%
FTSE 250 (MCX) 17,934.15 -0.59%
techMARK (TASX) 3,489.39 -1.07%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 403.60p 2.67%
Barclays (BARC) 181.20p 2.14%
easyJet (EZJ) 943.50p 1.89%
Ashtead Group (AHT) 1,340.00p 1.36%
Land Securities Group (LAND) 1,014.00p 1.30%
Lloyds Banking Group (LLOY) 55.55p 1.24%
3i Group (III) 661.50p 1.07%
Royal Bank of Scotland Group (RBS) 181.90p 1.06%
Prudential (PRU) 1,399.00p 1.01%
Provident Financial (PFG) 3,018.00p 1.00%

FTSE 100 - Fallers

ITV (ITV) 173.80p -3.34%
Sky (SKY) 833.00p -2.69%
Smiths Group (SMIN) 1,441.00p -2.64%
Taylor Wimpey (TW.) 147.10p -2.26%
WPP (WPP) 1,782.00p -2.09%
BAE Systems (BA.) 542.50p -1.99%
Barratt Developments (BDEV) 483.90p -1.95%
Hikma Pharmaceuticals (HIK) 1,951.00p -1.66%
Persimmon (PSN) 1,749.00p -1.63%
Intu Properties (INTU) 290.40p -1.59%

FTSE 250 - Risers

International Personal Finance (IPF) 301.20p 11.80%
Laird (LRD) 167.50p 5.74%
Homeserve (HSV) 626.00p 3.81%
Softcat (SCT) 315.30p 2.87%
Weir Group (WEIR) 1,781.00p 2.06%
Dunelm Group (DNLM) 787.00p 1.68%
Rathbone Brothers (RAT) 1,792.00p 1.53%
Fidelity China Special Situations (FCSS) 190.80p 1.22%
Thomas Cook Group (TCG) 68.35p 1.11%
Sports Direct International (SPD) 285.80p 1.06%

FTSE 250 - Fallers

NCC Group (NCC) 222.70p -35.58%
Keller Group (KLR) 646.50p -26.99%
Senior (SNR) 176.10p -13.76%
Aggreko (AGK) 873.50p -7.07%
Card Factory (CARD) 269.80p -6.03%
Bodycote (BOY) 605.00p -5.39%
Sophos Group (SOPH) 229.50p -4.45%
JRP Group (JRP) 125.10p -3.25%
Marshalls (MSLH) 273.10p -3.09%
IMI (IMI) 1,041.00p -3.07%