By Carla Mozee, MarketWatch
BOE leaves rates unchanged
LONDON (MarketWatch) -- The U.K.'s benchmark FTSE 100 scored its
highest close on record Thursday, swept up alongside European
stocks as the European Central Bank approached the start of its
massive asset-purchase program.
The FTSE 100 finished up 41.90 points, or 0.6%, at 6,961.14,
with only the oil-and-gas and telecom sectors trailing. Holding
sway over the direction of the British blue-chip index was investor
reaction to details of the ECB's asset-buying plan, first announced
in January. The Stoxx Europe 600 leapt to a fresh high for the year
(http://www.marketwatch.com/story/european-stocks-rise-euro-drops-as-investors-wait-for-qe-details-2015-03-05).
The ECB said it would start buying European public-sector bonds
on Monday. ECB President Mario Draghi said the central bank's
willing to buy government bonds with negative yields, although the
limit is its own deposit rate, which stands at minus 0.2%. The ECB
staff also upgraded its growth forecasts for the eurozone, the
U.K.'s largest trading partner.
Read about analyst reaction to Draghi's QE comments
(http://www.marketwatch.com/story/the-ecb-may-not-believe-its-own-luck-what-analysts-have-to-say-about-draghis-comments-2015-03-05).
"London is the economic centre of the European Union so even
though it isn't part of the eurozone, some of the extra euros
printed seem likely to be exchanged into pounds, some of which will
be used to buy U.K. stocks," CMC market analyst Jasper Lawler wrote
in a note. Lawler quipped that the, "FTSE 100 could be at 7,000 by
as early as tomorrow."
A jump of 7.1% in shares of Friends Life Group Ltd. pushed the
pensions and insurance-services provider to the top of the FTSE
100. Friends said it plans to raise its full-year dividend payment
(http://www.marketwatch.com/story/friends-life-profit-rises-38-lifts-dividend-2015-03-05),
to 31.15 pence a share from 21.14 pence a year earlier. The company
also posted a 38% rise in 2014 pretax operating profit. But pretax
profit fell because of higher claims and expenses.
Aviva PLC shares climbed 7.1% after the insurer and asset
manager also said it is raising its total dividend. The dividend
was bumped up to 18.1 pence a share for the year to Dec. 31, up
from 15 pence a share in 2013. Operating profit for the period rose
to GBP1.8 billion, from GBP1.5 billion in the same period last
year.
The moves by Aviva and Friends Life come ahead of the completion
of their planned GBP5.6 billion merger.
After spending time at the bottom of the blue-chip benchmark,
shares of Admiral Group finished up 3.8%. They had been fallen
after the car and home insurance company said its 2014 operating
profit fell
(http://www.marketwatch.com/story/admiral-group-posts-decline-in-2014-earnings-2015-03-05)
to 355.3 million pounds ($544.61 million) from GBP370.2 million a
year ago. Pretax profit decreased by 5% to GBP350.7 million.
But International Consolidated Airlines was the worst performer,
down 1.3% following an Irish Times report
(http://www.irishtimes.com/business/transport-and-tourism/iag-could-make-heathrow-concessions-for-aer-lingus-deal-1.2126536)
that the parent company of British Airways could make concessions
related to access at London's Heathrow Airport for Aer Lingus in
its effort win support for its proposal to buy the carrier.
(http://www.marketwatch.com/story/the-ecb-may-not-believe-its-own-luck-what-analysts-have-to-say-about-draghis-comments-2015-03-05)Bank
of England and sterling: In a relatively subdued and expected
announcement, the Bank of England on Thursday left its
quantitative-easing program unchanged at 375 billion pounds ($571.4
billion). It also maintained its lending rate at a record low of
0.5%. The rate has now been at that level since March 2009.
The pound (GBPUSD) had held steady around $1.5246 after the BOE
statement. But it eventually lost steam, trading at $1.5219 by late
Thursday afternoon. It bought $1.5266 on Wednesday.
The domestic-demand environment, a continuation of upward trends
in wage growth and the extent to which inflation stays well below
the BOE's target of 2% will be key factors in policy trends over
the next 12 months, wrote Investec in comments released after the
BOE's statement.
"While of course it is possible that our medium-term forecasts
are blown off course, our central view remains that the committee
will begin raising the Bank rate in November this year, about three
months earlier than currently factored into the yield curve," said
Philip Shaw, chief economist at Investec.
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