LSE: FTSE 100 index steady ahead of ECB policy meeting

Britains headline index was steady on Thursday as investors were reluctant to enter big positions ahead of ECBs policy meeting due later today. A recent series of upbeat data from the US and expectations for monetary stimulus in China following renewed signs of economic slowdown kept global equities underpinned.

The FTSE 100 index was up 0.27%, or 18.26 points, at 6 677.30 points at 8:17 GMT, having shifted in a daily range between 6 679.30 and 6 656.80 points. The blue-chip index rose by 0.1%, or 6.43 points, on Wednesday to settle at 6 659.04 points, the highest close since March 11th.

Global equities, along with the FTSE 100 index, drew support on upbeat data from the US, showing that the worlds biggest economy has overcome a slowdown in its economic activity due to harsh winter weather.

The Commerce Department reported on Wednesday that US factory orders jumped by 1.6% in February, following a 1.0% contraction in January. This was the fastest growth in seven months and outstripped expectations for a 1%-jump.

Meanwhile, payrolls processor ADP reported that the US private sector added 191 000 workers last month, little short of economists’ expectations for a jump to 195 000. February’s number was revised up by 39 000 to 178 000.

Market players attention is now turned towards Thursdays initial jobless claims, trade balance and services industry activity in the US. The Institute for Supply Managements non-manufacturing PMI is expected to have risen to 53.5 in March from 51.6 in February. Due on Friday are the all-important non-farm payrolls and unemployment rate.

Investors also awaited the outcome of ECBs policy meeting due later on Thursday to see whether the central bank is ready to take additional measures to combat disinflation within the euro area.

According to 54 out of 57 economists surveyed by Bloomberg, the European Central Bank will leave its benchmark interest rate unchanged at 0.25%, despite a recent fall in inflation to the lowest in four years. There were also speculations circling that the rate could be reduced below zero, effectively forcing banks to pay for holding their cash with the central bank, or a reduction to 0.1% or 0.15%.

In China, a gauge of services sector activity grew at a slower pace in March, adding to a recent spite of weak data points. The National Bureau of Statistics’ Chinese Non-Manufacturing Purchasing Managers’ Index slid to 54.5 from 55.0 in February.

Meanwhile, a separate private report by HSBC and Markit Economics showed that services activity grew at the fastest pace in four months, but composite data registered an overall slowdown in the economy as output at manufacturers fell.

The HSBC China Services PMI registered at 51.9, up from 51.0 in February. However, the HSBC Composite Output Index posted at 49.3 in March from 49.8 in February, a second month of contraction and the sharpest since November 2011.

Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC commented on the report: ““The HSBC China Services PMI suggests a modest improvement of business activities in March, with employment expanding at a faster pace. However, combined with the weaker manufacturing PMI reading, the underlying strength of the economy is softening, which should ultimately weigh on the labour market. Beijing should focus on leading indicators to launch fine-tuning measures that support growth.”

Economists had expected the Chinese government to introduce changes to its monetary policy soon in order to safeguard its economic growth target. Premier Li Keqiang announced yesterday that Beijing will sell $24 billion of bonds this year to fund building railways.

Gainers, losers

The FTSE 100s top three gainers for the day were Tullow Oil Plc, Standard Life Plc and Aberdeen Asset Management Plc.

Tullow Oil added 3.75%, or 28.25 pence, to 781.25 pence by 8:04 GMT, while Standard Life rose by 2.06%, or 8.00 pence, to 397.10 pence. Aberdeen AM was up 2.05%, or 8.50 pence, to trade at 423.50 pence.

Kingisher Plc rose by 1.16%, or 5.00 pence, to 436.52 pence. The biggest home improvement company in Europe began negotiations with the main investors of its rival Mr Bricolage to buy their shareholdings.

The FTSE 100s top three losers for the day were Vedanta Resources Plc, British Sky Broadcasting Group Plc and Tate & Lyle Plc.

Vedanta Resources fell by 1.25%, or 11.50 pence, to 911.50 pence by 8:07 GMT, while British Sky lost 1.33%, or 12.25 pence, to trade at 906.75 pence. Tate & Lyle fell by 1.08%, or 7.00 pence, to 643.50 pence.