FTSE CLOSE: Footsie slides after fresh drop in oil price; ECB comments on negative interest rates hit bank stocks

17.30: The FTSE 100 closed down 24.74 points at 6136.89 as London's top market reacted to another slide in the oil price.

Bank stocks took a hit after the European Central Bank signalled that negative interest rates appeared to have done no harm so far. 

Federal Reserve boss Janet Yellen is set to give a speech later, as traders digest minutes suggesting US policymakers are split over the timing of another interest rate rise.

The Dow Jones was down 157.1 points at 17,558.9 in early trading, while Germany's DAX was off 112.7 points at 9,511.8 and France's CAC 40 fell 45.8 points to 4,238.9.

Weaker oil price: Brent crude fell after a rise in the US dollar, in which commodities are priced

Weaker oil price: Brent crude fell after a rise in the US dollar, in which commodities are priced

Joshua Mahony of IG said: 'At a time when volatility and choppiness has been the name of the game, it is no surprise the optimism which characterised early trading in the FTSE has faded and given way to sharp losses.

'For the FTSE, it is just another day at the office, with the clearly defined month-long range once more dictating the state of play, as early gains turned lower once within the reliable 6200-6220 resistance zone.

'The big news for the day is the sharp appreciation of the Japanese yen, with USDJPY [US dollar vs yen] tumbling to fresh 17-month lows; flying in the face of economic theory given the massive quantitative easing scheme currently executed by the Bank of Japan.

'Stock markets have been in limbo somewhat recently, with a common directional theme hard to come by given the DAX weakness, Dow Jones strength and flat FTSE.

'However, underlying correlated markets are hinting towards a more risk-off sentiment given the strength in the typical havens of yen and gold. There is good reason to be cautious about equity markets right now, given the current flight to safety.'

Jasper Lawler of CMC Markets said: 'European stocks gave up early gains after minutes from the European Central Bank suggested a level of comfort with negative interest rates not shared by markets.

'Banking shares, including Germany’s Deutsche Bank are now back at their February lows when stock markets bottomed. If bank stocks are a leading indicator then broader markets are in for a large pullback.

'The ECB said that "on balance, the combination of all monetary policy measures taken, including negative rates, appeared to have contributed positively to banks' profitability thus far".

'The central bank highlighted the positive impact of negative rates on credit expansion but some members worried about increased pressure on banks' profitability and exacerbated financial market volatility if rates were to be cut further.'

Oil giant BP was down 0.25p to 339.3p, while miners Glencore and Antofagasta also suffered hefty falls after seeing their ratings cut by JPMorgan, falling 8p to 132.1p and 11.6p to 426.9p respectively.

Marks & Spencer said clothing and home like-for-like sales tumbled 2.7 per cent in the 13 weeks to March 26, as price deflation created a 'challenging backdrop' for trade.

But shares in the company soared 12.6p to 433p, as it beat City expectations of a 3.4 per cent fall in sales and improved on the third quarter when they slumped 5.8 per cent.

Pharmaceuticals continued to make gains after US drugs giant Pfizer scrapped its planned mega-merger with Allergan, days after the US Treasury unveiled new measures to curb tax avoidance, including so-called inversion deals.

Shares in AstraZeneca were up 40p to 4167.5p while Shire rose 35p to 4293p amid speculation that Pfizer may search for another partner in a bid to relocate its headquarters abroad.

Supermarket Sainsbury's saw its share price rise 7.5p to 287.2p after its was handed an upgrade by Credit Suisse.

Shares in regional airline Flybe fell after it said the pound's weakness against the dollar triggered £7million in extra costs. The stock was down 5.5p at 58.5p.

The pound was down 0.2 per cent against the euro at €1.23 after the head of the European Central Bank Mario Draghi said it would do 'whatever is needed' to push up low inflation and growth across the eurozone. Sterling was also down 0.3 per cent against the dollar at $1.40.

The biggest risers in the FTSE 100 were Rangold Resources up 205p to 6575p, Marks and Spencer up 12.6 to 433p, Sainsbury's up 7.5p to 287.2p, United Utilities up 17p to 946.5p.

The biggest fallers in the FTSE 100 were Glencore down 8p to 132.1, Berkeley Group down 170p to 3146p, Pearson down 43p to 825p, Lloyds Banking Group down 3.26p to 64.82p.

17.01: The FTSE 100 closed down 24.74 points at 6136.89. More to come. 

14.45: The Footsie was lower in late afternoon trading as US stocks posted early falls in tandem with a retreat by oil prices and on nerves ahead of further comment from Federal Reserve boss Janet Yellen, after minutes from the last US central bank policy meeting yesterday.

With an hour and three quarters of trading to go in London, the FTSE 100 index was 19.7 points, or 0.3 per cent lower at 6,141.9, only just above the day’s low of 6,137.90 and well below an early peak of 6,204.11.

European markets were also weaker, with Germany’s Dax 30 index and France’s CAC 40 index both down around 0.5 per cent.

In early trade on Wall Street, the blue chip Dow Jones Industrial Average dropped 96.7 points at 17,619.4, while the broader S&P 500 index lost 10.5 points at 2,056.1, and the tech-laden Nasdaq Composite lost 28.4 points at 4,892.4.

US stocks fell back as oil prices reversed earlier gains, with Brent crude down 1.3 per cent to $39.32 a barrel reflecting a rise in the dollar – in which commodities are priced. Oil prices jumped 5 per cent higher yesterday amid hopes for a production freeze deal at this month’s Opec meeting in Qatar.

Investors were also cautiously awaiting more pronouncements from Fed boss Janet Yellen, who will hold conversations today with former US central bank chairmen Ben Bernanke and Alan Greenspan at a panel discussion at the International House in New York.

Minutes from the US central bank’s March 15-16 policy meeting, published yesterday, indicated that the Fed appears unlikely to raise interest rates before June amid widespread concerns over its limited ability to counter the blow of a global economic slowdown.

The day’s only US data saw the latest weekly jobless claims fall by 9,000 to 267,000 in the seven days to April 2, almost bang in line with forecasts of 268,000, and near the lowest level in decades.

The average of new claims over the past four weeks, a less volatile measure, rose by 3,500 to 266,750, the Labor Department said.

On currency markets, the pound remained lower against a rallying dollar, down 0.3 per cent at $1.4081, but sterling bounced back after hitting a near a 2 year low against the euro this morning, gaining 0.2 per cent at €1,2408.

The euro weakened after minutes from the European Central Bank's March meeting, published this afternoon, showed that policymakers discussed the possibility of a sharper interest rate cut than actually actually implemented, but decided that a limited rate cut was appropriate as the prospect of a further cut could not be ruled out if the inflation outlook deteriorates. 

12.15: The Footsie was flat at lunchtime, reversing earlier gains as a rally in oil prices was pared back as investors looked nervously ahead to comment from Federal Reserve boss Janet Yellen tonight, after minutes from the last US central bank meeting yesterday showed a division of opinion.

By mid session, the FTSE 100 index was down 3.1 points, or 0.1 per cent at 6,158.6, just holding off the day’s low of 6,153.93 and well below an early peak of 6,204.11.

However, the UK blue chip index would have been around 10 points higher without the drag from stocks trading without the attractions of their latest dividend payouts, which included Aviva, Lloyds Banking Group, Pearson, and Taylor Wimpey.

Slip back: The Footsie was flat at lunchtime, reversing earlier gains as a rally in oil prices was pared back as investors looked nervously ahead to comment from Federal Reserve boss Janet Yellen tonight

Slip back: The Footsie was flat at lunchtime, reversing earlier gains as a rally in oil prices was pared back as investors looked nervously ahead to comment from Federal Reserve boss Janet Yellen tonight

European markets also reversed earlier gains, with Germany’s Dax 30 index and France’s CAC 40 index both losing around 0.2 per cent.

And US stock index futures pointed to opening falls today in New York, with the Dow Jones seen around 30 points lower, albeit having gained 112 points yesterday after the dovish comments from the Fed.

Minutes from the US central bank’s March 15-16 policy meeting indicated that the Fed appears unlikely to raise interest rates before June amid widespread concerns over its limited ability to counter the blow of a global economic slowdown.

Investors were awaiting more pronouncements from Fed boss Janet Yellen, who will hold conversations today with former US central bank chairmen Ben Bernanke and Alan Greenspan at a panel discussion at the International House in New York.

Chris Beauchamp, Senior Market Analyst at IG, said: 'It seems difficult to imagine Ms Yellen will say anything to make her look even more dovish, but she has been in a generous mood lately and so investors can hardly be blamed for hoping for more.' 

Meanwhile, the European Central Bank is willing to ease monetary policy further, according to three top officials including its president, Mario Draghi who echoed his US peers' concerns about an uncertain outlook for the global economy.

In the bank’s annual report, published today, Draghi wrote: ‘2016 will be a no less challenging year for the ECB. We face uncertainty about the outlook for the global economy. We face continued disinflationary forces. And we face questions about the direction of Europe and its resilience to new shocks’.

On currency markets, the pound held near a 1-1/2 year low against the euro at €1.2370, and also retreated versus the dollar to $1.4080 as worries over a possible ‘Brexit’ from the European Union and expectations that UK interest rates will remain on hold well into next year continued to dominate.

News that British productivity fell in the last three months of 2015 at the fastest pace since the depths of the financial crisis, according to official data today, will concern policymakers who have long waited for signs of improvement.

Output per hour in the three months to December dropped 1.2 per cent compared with the July-September period, the Office for National Statistics said, the biggest decline since the end of 2008 and reversing a 0.6 per cent rise in the third quarter.

Among equities, the rally in commodity stocks was starting to run out of steam as oil prices turned flat after strong gains yesterday.

At lunchtime, Brent crude was up just 0.05 per cent at $39.86 a barrel having soared 5 per cent higher yesterday after the Kuwaiti governor of the oil cartel Opec said an output freeze.

Energy giant Royal Dutch Shell remained 5.5p higher at 1,674.0p, but BP shed 0.6p at 338.9p, also impacted by a looming row over the pay of its chief executive, Bob Dudley

Elsewhere shares in high street bellwether Marks & Spencer held firm, climbing 3 per cent, or 13.3p higher to 433.7p after a fall in like-for-like sales at its clothing and home business proved not as steep as the City anticipated.

M&S still saw its clothing and home like-for-like sales drop 2.7 per cent in the 13 weeks to March 26, as price deflation created a ‘challenging backdrop’ for trade, but that was ahead of City expectations for a 3.4 per cent fall and improved on a 5.8 per cent slump in the third quarter.

Elsewhere, supermarkets group Sainsbury also rose, adding 2 per cent or 5.6p to 285.3p after being upgraded to outperform from underperform by Credit Suisse.

The broker said the food retail sector is a recovery story and it thinks that the grocer's bid for Argos-owner Home Retail is ‘financially and strategically inspired.’

And AstraZeneca extended yesterday’s gains into a second session, rising another 58.5p to 4,186.0p as French broker Societe Generale lifted its target price and maintained a buy rating on the stock.

The drugmaker’s shares jumped over 2 per cent higher yesterday as the sector got a boost after US giant Pfizer pulled out of a deal to buy Ireland’s Allergan, stoking rumours of fresh deal-making. AstraZeneca fought off takeover moves from Pfizer in 2014, 

Among the small caps, AIM-listed explorer Ascent Resources – which recently went on a roller-coaster ride after a bid approach from Cadogan Petroleum was pulled - dropped 14 per cent today, down 0.25p to 1.55p after revealing a placing with investors using the Primarybid.com platform priced at 1.4p a share.

The placing raised around £500,000 which the company said will meet the group’s working capital requirements until the end of the second quarter of 2016 during which time it expects the final outcome of a review of its permit for the Petisovci gas field in Slovenia.

The private placing is the second to be arranged in a week by the recently launched Primarybid platform, which helps AIM investors to tap into share price discounts normally only offered to institutions.

On March 31, Pathfinder Minerals said it had raised another £100,000 in a placing of shares through PrimaryBid.com following good investor demand at 1.1p each. Earlier in the month, Pathfinder had raised £200,000 via an institutional placing at 0.8325p a share. Pathfinder shares today were flat at 1.075p a share.

Dave Mutton, COO of PrimaryBid said: ‘Having successfully launched the platform last month we are excited to see it already having an impact on the landscape of the London investing scene, challenging City conventions and demonstrating the impact an innovative fintech company can have on an established market.

‘The significant and exciting demand that is building on the platform demonstrates that the sector is ready and is embracing such innovation. We expect to see many more such transactions in the weeks and months ahead.’

PrimaryBid has attracted around £18million in bids for placing shares across 40 companies since its launch on March 3. 

10.15: The Footsie held firm as the morning progressed, with commodity stocks up on firmer oil prices after minutes from the last Federal Reserve policy meeting indicated another US rate hike was not imminent, while retailer M&S rose as a decline in its clothing sales proved less than feared.

By mid morning, the FTSE 100 was 14.0 points, or 0.2 per cent higher at 6,175.6, albeit drifting back from an early peak of 6,204.11, having gained 70.40 points yesterday.

The UK blue chip index would have been around 10 points higher without the drag from stocks trading without the attractions of their latest dividend payouts today, which included Aviva, GKN, Lloyds Banking Group, Pearson, Rexam, St James’s Place, and Taylor Wimpey.

Hopeful: Shares in Marks & Spencer, under new boss Steve Rowe (pictured) , climbed nearly 1.5 per cent, after a fall in like-for-like sales at its clothing and home business proved not as steep as the City had anticipated

Hopeful: Shares in Marks & Spencer, under new boss Steve Rowe (pictured) , climbed nearly 1.5 per cent, after a fall in like-for-like sales at its clothing and home business proved not as steep as the City had anticipated

European markets were slightly firmer, with Germany’s Dax 30 index and France’s CAC 40 index both gaining around 0.3 per cent.

Overnight in New York, the Dow Jones closed 112 points higher, and Asian stocks advanced today thanks to a firmer oil price, reassured by the dovish comments from the Fed.

Minutes from the US central bank’s March 15-16 policy meeting indicated that the Fed appears unlikely to raise interest rates before June amid widespread concerns over its limited ability to counter the blow of a global economic slowdown.

Caxton FX analyst Alexandra Russell-Oliver, said: ‘The Federal Reserve meeting minutes were released last night. The Fed debated an April rate hike—some see a case for it, some think that would send a signal of urgency that isn’t “appropriate”.

‘Subsequently, the Fed continues to expect to raise rates at a gradual pace, and is proceeding with caution. So while an April rate hike remains unlikely, a June hike is still on the table, provided upcoming data continues to support the argument for raising rates. ‘

Meanwhile European Central Bank boss, Mario Draghi has said the future of the global economy remains uncertain and that there are questions about Europe's ability to weather new shocks.

In the bank’s annual report, published today, Draghi wrote: ‘2016 will be a no less challenging year for the ECB. We face uncertainty about the outlook for the global economy. We face continued disinflationary forces. And we face questions about the direction of Europe and its resilience to new shocks’.

Minutes from the ECB’s policy meeting in March are also due to be published later today.

On currency markets, the pound dropped to a 1-1/2 year low against the euro at €1.2340, and also retreated versus the dollar to $1.4066 as worries over a possible ‘Brexit’ from the European Union and expectations that UK interest rates will remain on hold well into next year continued to dominate.

Such expectations for interest rates held sway even despite more data showing further strength in UK house prices last month.

The latest survey from mortgage lender Halifax showed house prices rising in March at their fastest pace in seven months, bringing annual growth back into double digits for the first time since mid-2014.

Halifax said UK house prices rose 2.6 per cent in March, rebounding after a 1.5 per cent drop in February, and, on an annual basis, the rise was 10.1 per cent for the three months to March, he biggest increase since July 2014, reflecting a big imbalance between supply and demand.

Among equities, a rally by commodity stocks once again led the FTSE 100 higher following another rise in the price of oil, with energy giant Royal Dutch Shell up 24p to 1,693p, and miner Rio Tinto ahead 28p to 1,962.5p.

Brent crude held around the $40 a barrel level today, having soared 5 per cent higher yesterday aided by weak US supply data, and after the Kuwaiti governor of the oil cartel Opec said an output freeze could be enforced following a meeting in Qatar on April 17.

Meanwhile, shares in high street bellwether Marks & Spencer climbed nearly 1.5 per cent, or 5.8p higher to 426.2p after a fall in like-for-like sales at its clothing and home business proved not as steep as the City had anticipated.

M&S saw its clothing and home like-for-like sales drop 2.7 per cent in the 13 weeks to March 26, as price deflation created a ‘challenging backdrop’ for trade, but that was ahead of City expectations for a 3.4 per cent fall and improved on a 5.8 per cent slump in the third quarter.

Tony Cross, Market Analyst at Trustnet Direct, said: ‘Marks and Spencer has been the big corporate story of this morning and it’s been a mixed bag there – the numbers came in fractionally better than expected, including profit margins, but by the board’s admission there’s still lots to be done and the outlook is caged with a degree of caution.

‘That said, the fact the clothing sales decline wasn’t as bad as the previous quarter seems to be saving the day.’ 

08.15: The Footsie pushed higher in early trading, tracking overnight gains by US and Asian markets after minutes from the last Federal Reserve policy meeting indicated that another US rate hike is not imminent, helping send oil prices higher again.

In opening deals, the FTSE 100 was up 22.6 points, or 0.4 per cent at 6,184.27, having closed 70.40 higher yesterday on a firmer oil price and as investors had speculated about future takeover activity in the drugs sector following the collapse of the Allergan-Pfizer merger.

Overnight in New York, the Dow Jones closed 112 points higher, and Asian stocks advanced today after the dovish Fed minutes, and as Brent crude broke through the $40 a barrel level once again, aided by weak US supply data and hopes for a possible production freeze deal.

Dovish boost: The Footsie pushed higher in early trading, tracking overnight gains by US and Asian markets after minutes from the last Federal Reserve policy meeting indicated that another US rate hike is not imminent

Dovish boost: The Footsie pushed higher in early trading, tracking overnight gains by US and Asian markets after minutes from the last Federal Reserve policy meeting indicated that another US rate hike is not imminent

The main focus was on the minutes from the Fed's March 15-16 policy meeting, which indicated that the US central bank appears unlikely to raise interest rates before June amid widespread concerns over its limited ability to counter the blow of a global economic slowdown.

The minutes showed policymakers debated whether they might hike rates in April but ‘a number’ of them argued headwinds to growth would probably persist, with many arguing they should be cautious about raising rates.

Craig Erlam, Senior Market Analyst at Oanda, said: ‘While there is some support within the committee to continue to raise interest rates, I think it’s clear from the minutes that they’re not that close to forming a consensus at this stage, which effectively takes April off the table, as the markets had already assumed.

‘This sudden dovishness from the Fed does suggest that we’re seeing an alternative approach being adopted that puts more emphasis on the markets than they would have us believe.’

In the absence of much important economic data today - aside the latest Halifax house prices report due at 8.30am - investors will also look for direction from minutes for the March European Central Bank policy meeting, set to be published this afternoon.

He added: ‘The meeting accounts from the March ECB meeting should shed further light on the central bank’s intentions this afternoon. Mario Draghi appeared to suggest at the meeting that no further rate cuts are being considered at the moment, which is what sparked the initial rally in the euro last month and it will be interesting to see if this view is shared by the rest of the committee and whether it applies to all forms of easing. Is the ECB done for now and intending to monitor the situation for the foreseeable future and see if its actions have the desired effects.

‘Central banks will continue to be a dominant theme in the markets on Thursday as we’ll also hear from Mario Draghi when he speaks on the economic and financial situation in Europe, in Lisbon, as well as Janet Yellen this evening. Yellen’s event will be particularly interesting as it is a panel discussion that includes a number of former Fed chairman, who could go into great depth about past and current policies, as well as the possible course of action going forward. I’m sure markets will be paying very close attention to the comments that come from this event.’

Stocks in focus in London include:

MARKS & SPENCER – The retailer has reported another fall in quarterly underlying sales in its clothing division, illustrating the extent of the challenge facing its new boss, Steve Rowe.

BP - Shareholder advisory firm Glass Lewis has recommended that the energy giant’s investors vote against chief executive Bob Dudley's proposed $19.6million remuneration for 2015 after the UK firm recorded its biggest annual loss.

SHIRE – The FTSE 100-listed drugmaker said it expected its deal to buy American group Baxalta to proceed as expected, even after the US Treasury proposed new plans to curb inversion deals that let American firm skirt higher tax by shifting their domicile abroad.

HSBC, RBC, BARCLAYS –The trio – among Britain's largest banks - are planning to close about 400 branches this year, Reuters has reported citing people familiar with the situation, a new programme of closures that could leave thousands of customers without easy access to a bank.

PREMIER FOODS – The Mr Kipling cakes group has said it had held ‘constructive talks with indicative bidder, US spice company McCormick & Co and added that it would meet its main institutional investors over the next few days.

PETROFAC: A director of the oil services company ordered ‘confidential payments’ worth $2million to help to secure an oil contract in Kuwait, according to documents seen by The Times.

DUNELM – The homewares retailer saw its total revenue in its third quarter to April 2 grow by 5.9 per cent year-on-year to £229.0million driven by a rise in like-for-like sales and an increase in online home delivery sales.

FLYBE – The UK regional airline said its results for the year to the end of March are set to hit expectations as its load factor fell and passenger numbers were flat in the fourth quarter. Flybe said its passenger volumes in the quarter to the end of March were unchanged at 1.8 million, with passenger revenue also flat year-on-year.

FIRSTGROUP - The transport operator said trading in its fourth quarter to the end of March was in line with its expectation, and that there have been no significant developments since its last update at the end of January. It also said it will decrease the number of trading updates it issues per financial year to four from six previously, starting with the year to the end of March 2017.

UK company news scheduled today includes:

Trading updates: Marks & Spencer, Flybe, Firstgroup, Dunelm, Victrex

Finals: Alliance Pharma, Belgravium Technologies, Netscientific, Puretech Health, Ubisense Group

Interims: Imperial Innovations

Ex-dividends to knock 9.46 points off the FTSE 100 index (Aviva, GKN, Lloyds Banking Group, Pearson, Rexam, St James’s Place, Taylor Wimpey)

Economic news scheduled today includes:

Halifax house price index at 8.30am

ECB March meeting minutes at 12.30pm

US weekly jobless claims at 1.30pm

US JOLTS job openings at 3pm

US consumer credit at 8pm

 

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