London midday: Stocks rise on hopes of ECB monetary easing

UK stocks were on the front foot on Thursday as the European Central Bank looked set to announce further stimulus measures.

ECB President Mario Draghi is expected to announce an expansion to the quantitative easing programme when he delivers his speech at 1330 GMT. The monetary authority is also projected to reveal a cut to the deposit rate when the policy decision is revealed at 1245 GMT.

“It’s quite rare that the market is so united in its belief that a major central bank will announce further monetary easing but ECB President Mario Draghi has made it perfectly clear that further stimulus measures are being drawn up in preparation for this meeting,” said Craig Erlam, senior market analyst at Oanda.

“The result is that the question today is not whether the ECB will ease, but how far it will go.”

Danske Bank expects the ECB to cut the deposit rate by 20 basis points. The bank also predicts an increase in asset purchases to €75bn per month from the current €60bn. The ECB may expand the QE programme until December 2016 from the original intended finish date of September 2016, Dankse added.

On home soil, a report from Markit showed the UK services sector expanded at a greater pace in November. The purchasing managers’ index rose to 55.9 last month from 54.9 in October, beating estimates of 55. A reading above 50 suggests growth in the sector while a figure below that indicates a contraction.

Earlier, Caixin’s PMI on Chinese services fell to 51.2 last month from 52 in October, adding to woes about the slowdown in the world’s second largest economy.

Eurozone services PMI was revised down unexpectedly to 54.2 in November from an earlier estimate of 54.9, Markit revealed.

Eurozone retail sales gained 2.5% year-on-year in October, compared to analysts’ expectations of 2.6% and the previous month’s 2.9%, Eurostat figures showed.

Still to come, Markit will release its services PMI on the US in afternoon trade. The US will also see the release of reports on durable goods orders, factory orders and weekly jobless claims.

In company news, Morrison Supermarkets rebounded from lows on Wednesday as it was demoted from the FTSE 100 to the FTSE 250. The group's shares have dropped amid concerns about its recovery plans in the face of a supermarket price war.

Costa Coffee and Premier Inn owner Whitbread rallied as Credit Suisse added the stock to its 'Global and Europe Focus Lists', lifting the price target to 5,800p from 5,500p.

Investment management firm Brewin Dolphin Holdings jumped after reporting substantial statutory profit growth for the year as the company focuses on expansion

Going the other way, mining stocks declined including BHP Billiton, Antofagasta and Fresnillo as metal prices fell on the back of the weak Chinese services PMI.