London close: Stocks plunge as ECB's decision on QE disappoints
UK stocks reversed earlier gains in Thursday’s session to end lower after the European Central Bank failed to deliver on market expectations for an increase in monthly asset purchases.
The FTSE fell 2.27% at the close to 6,275 points as ECB President Mario Draghi announced the asset purchase programme will be extended to March 2017 from September 2016 but will continue at €60bn a month. Analysts had expected the ECB to increase purchases to around €75bn a month.
The euro surged 2.36% against the dollar to $1.0865 after the policy decisions was revealed. European equities plunged, with the DAX finishing down 3.58%, the CAC 40 also down 3.58%, the FTSE MIB down 1.99%, and the IBEX 35 down 2.15%.
Ben Brettell, senior economist at Hargreaves Lansdown, said “judging by the market reaction, Draghi appears to have over-promised and under-delivered”.
“The disappointment in financial markets is palpable this afternoon. The euro has strengthened (which won’t help the Eurozone economy) and stock markets have fallen on the announcements,” he added.
Draghi’s press conference on the QE announcement followed the ECB's decision on key rates, which revealed a 10 basis point cut to the deposit rate to -0.30%, as expected. Interest rates and the marginal lending rate were left unchanged at 0.05% and 0.30%, respectively, as predicted.
In other Eurozone news, 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.
The Eurozone services purchasing managers’ index was revised down unexpectedly to 54.2 in November from an earlier estimate of 54.9, Markit revealed.
A reading above 50 suggests growth in the sector while a figure below that indicates a contraction.
In the UK, Markit’s services PMI rose to 55.9 last month from 54.9 in October, beating estimates of 55.
Stateside, the Institute for Supply Management's non-manufacturing index, which surveys the sector's purchasing and supply executives, tumbled to 55.9 in November from 59.1 in October and compared with analysts’ expectations for a 58 reading.
US durable goods rose 2.9% in October compared with a 3% increase the previous month, according to the Commerce Department.
Separately, the Commerce Department revealed factory orders rose 1.5% in October compared with analysts’ expectations for a 1.4% gain and a 1% decline a month earlier.
Among companies, shares in Costa Coffee and Premier Inn owner Whitbread were higher after Credit Suisse added the stock to its ‘Global and Europe Focus Lists’, lifting the price target to 5,800p from 5,500p.
Meggitt was in the black, bouncing back from recent losses as it emerged the aerospace and defence firm has been relegated to the FTSE 250 following the latest FTSE quarterly review.
Equipment rentals company Ashtead was on the back foot after Exane BNP Paribas cut the stock to 'neutral' from 'outperform', saying the risk/reward was increasingly skewed to the downside.
Associated British Foods was also knocked lower by a downgrade, as Goldman Sachs cut its rating on the stock to ‘sell’ from ‘buy’.
Investment management firm Brewin Dolphin Holdings jumped after reporting substantial statutory profit growth for the year as the company focuses on expansion.
Market Movers
FTSE 100 (UKX) 6,292.97 -1.99%
FTSE 250 (MCX) 17,428.34 -0.72%
techMARK (TASX) 3,217.73 -1.10%
FTSE 100 - Risers
Berkeley Group Holdings (The) (BKG) 3,352.00p 1.24%
Sage Group (SGE) 581.50p 0.78%
Whitbread (WTB) 4,723.00p 0.55%
Meggitt (MGGT) 376.80p 0.48%
G4S (GFS) 232.80p 0.04%
SABMiller (SAB) 4,045.50p -0.00%
Merlin Entertainments (MERL) 423.50p -0.35%
Randgold Resources Ltd. (RRS) 4,182.00p -0.40%
Barratt Developments (BDEV) 606.50p -0.41%
Rolls-Royce Holdings (RR.) 598.50p -0.42%
FTSE 100 - Fallers
Sports Direct International (SPD) 697.50p -5.36%
Ashtead Group (AHT) 1,051.00p -4.97%
Johnson Matthey (JMAT) 2,708.00p -4.68%
Royal Mail (RMG) 466.60p -4.07%
Experian (EXPN) 1,203.00p -4.07%
Schroders (SDR) 2,904.00p -3.94%
Shire Plc (SHP) 4,570.00p -3.69%
3i Group (III) 479.20p -3.58%
Severn Trent (SVT) 2,199.00p -3.55%
BP (BP.) 368.55p -3.52%
FTSE 250 - Risers
Brewin Dolphin Holdings (BRW) 289.60p 7.66%
Keller Group (KLR) 873.50p 5.81%
Aveva Group (AVV) 2,338.00p 4.80%
Shawbrook Group (SHAW) 346.70p 4.11%
Ted Baker (TED) 3,493.00p 3.37%
CLS Holdings (CLI) 1,860.00p 3.33%
Big Yellow Group (BYG) 837.50p 3.14%
Laird (LRD) 377.70p 3.06%
Northgate (NTG) 407.60p 2.93%
Greggs (GRG) 1,322.00p 2.72%
FTSE 250 - Fallers
Spire Healthcare Group (SPI) 303.10p -7.82%
Debenhams (DEB) 80.00p -6.32%
Evraz (EVR) 75.95p -5.89%
Jimmy Choo (CHOO) 125.50p -5.64%
Smith (DS) (SMDS) 396.40p -4.80%
Intermediate Capital Group (ICP) 595.50p -4.64%
Petra Diamonds Ltd.(DI) (PDL) 66.60p -4.17%
Wizz Air Holdings (WIZZ) 1,680.00p -4.00%
Telecom Plus (TEP) 1,085.00p -3.98%
Henderson Group (HGG) 300.20p -3.60%