London close: Stocks end lower as ECB leaves policy unchanged
London stocks finished flat on Thursday as the European Central Bank left policy measures unchanged and said it had not discussed extending or ending its asset purchase programme.
The FTSE 100 closed up 0.07% to 7,026.90p.
The ECB's Governing Council decided to maintain its asset purchase programme at €80bn per month until March 2017, as expected by analysts.
The central bank voted to leave interest rates at 0%, the marginal lending facility at 0.25% and the deposit facility at -0.40%, which was also anticipated.
At a press conference following the policy announcement, Draghi said policymakers left the question of its QE programme off the table in their discussions.
However, Draghi hinted that policymakers may extend the programme beyond March later in the year. He said the ECB is currently re-examining the design of the QE programme and would take a decision at the 8 December meeting.
“With both the QE extension and QE taper topics being left to December, perhaps the most telling comments came when Draghi went off script to speculate that he felt an abrupt end to asset purchases was very unlikely,” said IG market analyst Joshua Mahony.
“With just four months of QE left to run and no taper process in place, it seems that March 2017 will not be the final month of asset purchases. Mario Draghi would have been happier to put out a sign on the front door saying ‘come back in December’.”
In the UK, data for September from the Office for National Statistics showed 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 for the 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.
Another report showed UK construction workloads lifted slightly in the third quarter, though growth in London was depressed by Brexit uncertainty.
The Royal Institution of Chartered Surveyors (RICS) quarterly construction market survey found a balance of 19% of surveyors reported an increase in current construction workloads in the quarter, up from 17% in the preceding period.
In the US, initial jobless claims rose by 13,000 to a seasonally adjusted 260,000 in the week ended 15 October. Economists had forecast 250,000 claims.
Meanwhile, oil prices retreated on a stronger dollar and profit taking after a strong rally in the previous session when data from the US Energy Information Administration showed a surprise drawdown in crude inventories last week and Saudi Arabia said countries outside OPEC would be willing to join the cartels plan to cut production.
Brent crude dropped 2.4% to $51.43 per barrel and West Texas Intermediate declined 2.08% to $50.76 per barrel at 1644 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.
Smiths Group and BAE Systems were under the cosh as the FTSE 100-listed companies went ex-dividend.
Sky declined as it unveiled more details of its mobile service, saying it will shortly start registering interest from customers.
Shares in rival broadcaster ITV also dropped on worries about weaker advertising markets.
Market Movers
FTSE 100 (UKX) 7,026.90 0.07%
FTSE 250 (MCX) 17,945.05 -0.53%
techMARK (TASX) 3,488.72 -1.09%
FTSE 100 - Risers
Royal Bank of Scotland Group (RBS) 186.10p 3.39%
Barclays (BARC) 182.75p 3.02%
Standard Chartered (STAN) 699.20p 2.03%
International Consolidated Airlines Group SA (CDI) (IAG) 400.90p 1.98%
Land Securities Group (LAND) 1,020.00p 1.90%
Ashtead Group (AHT) 1,343.00p 1.59%
Associated British Foods (ABF) 2,528.00p 1.53%
Legal & General Group (LGEN) 210.90p 1.35%
Centrica (CNA) 219.00p 1.30%
Lloyds Banking Group (LLOY) 55.56p 1.26%
FTSE 100 - Fallers
Sky (SKY) 823.50p -3.80%
ITV (ITV) 173.10p -3.73%
WPP (WPP) 1,755.00p -3.57%
Smiths Group (SMIN) 1,434.00p -3.11%
Taylor Wimpey (TW.) 146.80p -2.46%
BAE Systems (BA.) 541.00p -2.26%
Worldpay Group (WI) (WPG) 281.70p -2.26%
Barratt Developments (BDEV) 483.40p -2.05%
Tesco (TSCO) 210.60p -1.98%
Antofagasta (ANTO) 512.50p -1.63%
FTSE 250 - Risers
International Personal Finance (IPF) 300.00p 11.36%
Softcat (SCT) 330.90p 7.96%
Laird (LRD) 168.60p 6.44%
Virgin Money Holdings (UK) (VM.) 326.40p 4.62%
Homeserve (HSV) 624.50p 3.57%
Fidelity China Special Situations (FCSS) 194.00p 2.92%
OneSavings Bank (OSB) 280.10p 2.08%
Allied Minds (ALM) 351.70p 1.91%
Thomas Cook Group (TCG) 68.75p 1.70%
Rathbone Brothers (RAT) 1,794.00p 1.64%
FTSE 250 - Fallers
NCC Group (NCC) 223.00p -35.49%
Keller Group (KLR) 644.50p -27.22%
Senior (SNR) 176.90p -13.37%
Aggreko (AGK) 858.00p -8.72%
Card Factory (CARD) 270.10p -5.92%
Bodycote (BOY) 605.00p -5.39%
IMI (IMI) 1,028.00p -4.28%
Sophos Group (SOPH) 230.50p -4.04%
Hill & Smith Holdings (HILS) 1,114.00p -3.88%
Marshalls (MSLH) 271.20p -3.76%