Banks decline after ECB stands pat on rates
After a wobbly start to the day, U.K.'s blue-chip stock benchmark turned firmly higher Thursday afternoon as the pound dropped against the euro after the European Central Bank stood pat on policy.
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The FTSE 100 jumped 0.6% to 7,395.17, setting it on track to break a three-day losing run.
Investors were careful of making any big moves earlier in the day as they waited for the ECB to lay out its monetary policy. As expected the bank kept interest rates at record lows, but refrained from making any announcements on its bond-buying program as some traders had expected. Instead, ECB boss Mario Draghi said the central will present a bulk of measures to "calibrate" its QE program at the Oct. 26 meeting.
Read:ECB live blog recap: Draghi points to October decision on QE taper (http://blogs.marketwatch.com/thetell/2017/09/07/ecb-live-blog-is-a-strong-euro-making-mario-draghi-miserable/)
The euro rallied to an intraday high of $1.2059 after the press conference, as Draghi was seen as putting more emphasis on the economic recovery than on the recent strengthening exchange rate. The euro's 14% jump against the dollar this year has recently caused a headache in Frankfurt and traders had expected the ECB boss to stress the impacts it would have on the economy and monetary policy.
"His expression of confidence in the broad based, robust and solid recovery of the eurozone, far outweighed any discussion of euro strength and its impact on preventing the ECB reaching policy goals," said Fiona Cincotta, market analyst at City Index, in a note.
"The fact that the ECB have finally started to discuss the winding down of QE also supported the euro. [The discussions] were very preliminary, but the market was just relieved to know that they have started," she added.
The euro jumped to GBP0.9168, up from GBP0.9137 late Wednesday in New York. The eurozone is the U.K.'s largest trading partner, so a stronger shared currency means that U.K. products become cheaper for buyers on the continent, setting U.K. exporters up for an earnings boost.
Big multinationals in the FTSE were among biggest advancers on Thursday, with shares of AstraZeneca PLC (AZN.LN) (AZN.LN) up 4.1%, Imperial Brands PLC (IMBBY) (IMBBY) higher by 3.1% and Royal Dutch Shell PLC (RDSB.LN)(RDSB.LN) rising 1.5%.
Banks down: In London, shares of banks followed those of European lenders lower, after the ECB left the key interest rates unchanged. Higher interest rates could bolster net interest margin at banks.
Shares of HSBC PLC (HSBA.LN) (HSBA.LN) lost 0.6%, Barclays PLC (BCS) (BCS) was off 0.6% and Standard Chartered PLC (STAN.LN) gave up 0.8%.
Meanwhile, Royal Bank of Scotland (RBS.LN) slid 1.2% as U.K. lawmakers called on the Financial Conduct Authority to publish its report on potential missteps by the bank's business restructuring unit.
Insurers blues: Shares of insurance companies rose after the government looked set to backpedal on a rule change that affects how compensation for personal injury is calculated.
The U.K.'s Ministry of Justice has drawn up draft legislation that would bring the Ogden rate, used to set personal-injury lump-sum payouts, to a range of zero and 1%. In March, the government cut the discount rate to minus 0.75%, from 2.5%, hitting profits at insurance companies.
"While the industry was prepared for a change to the discount rate, it was a lot harsher than anyone had planned. Today's changes won't be applied retrospectively and will take time to take effect, but they should be cheered by investors," said Neil Wilson, senior market analyst at ETX Capital, in a note.
On Thursday, shares of Direct Line Insurance Group PLC (DLG.LN) climbed 1.9%, and Admiral Group PLC (ADM.LN) rose 1%.
Insurers have been down in recent days on fears Hurricane Irma, which has wreaked havoc on a string of Caribbean Islands, will lead to billions of dollars in damages.
Read:Death toll rises to 10 as Hurricane Irma barrels through Caribbean, heads for Florida (http://www.marketwatch.com/story/death-toll-rises-to-8-as-hurricane-irma-barrels-through-caribbean-heads-for-florida-2017-09-07)
Other movers: Off the FTSE 100, Bovis Homes Group PLC (BVS.LN) jumped 9.3%, even as the home builder posted a 31% drop in first-half pretax profit (http://www.marketwatch.com/story/bovis-homes-profit-down-31-on-costs-2017-09-07). Revenue increased 3.6% to GBP427.8 million on an increase in average selling price. Bovis's new strategic plan should be well received by investors, as it could drive up per-share earnings growth, said analysts at Liberum in a note.
On the mid-cap FTSE 250, Capita PLC (CPI.LN) fell 1.9%. The business support services group said Thursday it will restate 2016 profit lower (http://www.marketwatch.com/story/capita-shares-fall-after-it-restates-2016-profit-2017-09-07) after adopting a new accounting reporting standard.
(END) Dow Jones Newswires
September 07, 2017 11:12 ET (15:12 GMT)