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Double Whammy From ECB Chief, But Markets Still Gain ? Latest Market Analysis

The FTSE 100 posted a third consecutive day of gains, closing 22 points higher at 5340.4, despite what could be perceived as let downs from Europe’s main central banks.

Firstly the Bank of England kept interest rates unchanged at 0.5%, which was not unexpected, however it did not extend its bond buying program (quantitative easing) which some had optimistically hoped for. Jean Claude Trichet, the head of the European Central Bank, also kept rates for the Euro-zone unchanged, this time at 1.5%, when many had hoped for a cut as they believed rises earlier this year had been too early and were undermining growth in the region.

The tone of Mr Trichet’s subsequent press conference also seemed to dismiss the severity of risks to economic growth, and overplay the strength of inflation in the Euro-zone, prompting many to suggest he was ‘covering’ for his own previous mistakes, as opposed to doing what was right for the European economy.

The news from BoE and ECB saw equity markets give up gains of over 1% to trade in negative territory of a similar amount. However, the confidence of the last few days returned, an increase in US export data possibly helping, and global indices gradually recovered ground as the afternoon wore on.

In the UK, vague rumours arose that a private equity company may launch a takeover for Marks & Spencer, which drove the shares 8.1p higher to 321.9p. Supermarket chain Morrisons surprised with better revenue growth and profit margins than the market had expected in a half year update and its shares gained 4.2%, ending the day 12.2p better at 301.6p

Locally, shares in Stadium Group, the electronics manufacturer with operations in Hartlepool, gained 3% on news that the Chairman had purchased a further 15000 shares and closed at 67.5p.

Despite the buoyant nature of risk assets, Gold also recovered some of its lost ground with a surprisingly strong gain of $43, closing at $1860.

This was posted in Bdaily's Members' News section by John Dance .