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London open: Stocks gain ahead of OPEC and ECB meetings
UK stocks rebounded on Thursday as oil prices jumped ahead of an OPEC meeting and as investors awaited the European Central Bank’s latest policy decision.
Brent crude was up 0.91% to $50.18 per barrel and West Texas Intermediate increased 0.81% to $49.41 per barrel at 0843 BST before OPEC leaders gathered in Vienna to discuss ways to tackle the global supply glut later on Thursday.
Reports on Wednesday suggested OPEC may consider a new output ceiling in its closed-door meeting. OPEC has been producing about 32.5 million barrels per day, above the 30 million barrel ceiling that had previously been in place.
“I highly doubt any ceiling would require a cut in current production levels, given the reluctance to do reduce output until now,” said Craig Erlam, senior market analyst at Oanda.
“Even a freeze would be very surprising given that its plan to let the markets balance themselves by pricing out higher cost players is finally baring some fruit.”
Traders are also looking ahead to government data on US weekly crude inventories at 1600 BST.
The ECB is due to announce its policy decision at 1245 BST followed by a press conference with President Mario Draghi at 1330 BST.
The central bank is expected to keep policy unchanged so economists will be more interested in the ECB’s latest economic and inflation forecasts.
“Interestingly oil may well play a key part in the ECB’s press conference later today,” said Connor Campbell, financial analyst at Spreadex. “Analysts are expecting the central bank to revise the Eurozone’s inflation forecasts higher, in part due to the black stuff’s recent rallies.”
In Asia, Bank of Japan board member Takehiro Sato criticised the central bank’s negative interest rate policy as counter-productive.
Sato called on the BOJ to enact policy measures that will have a long-term effect on beating deflation. He also slammed the 2% inflation target, saying rising prices without wage gains would hurt consumption.
Still to come, Markit/CIPS UK construction purchasing managers’ index at 0930 BST, the US ADP private payrolls report at 1315 BST and US initial jobless claims at 1330 BST.
In company news, Johnson Matthey shares rallied even as it reported a 22% drop in full year pre-tax profit, partly due to costs related to its restructuring programme. Yet revenues gained 6% and chief executive Robert MacLeod said: “Looking ahead to 2016/17, we expect performance to be ahead of 2015/16 and in line with current market expectations.”
Ryanair flew higher as it reported a 12% jump in passenger numbers in May.
Fastjet slumped after the Tanzania-based budget airline posted a narrower loss the year to the end of December but said it expects to report a trading loss and to remain cash flow negative in 2016.
Investec slid after announcing its intention to place up to 30.87 million new ordinary shares in the company, representing 4.99% of its current issued share capital and 3.4% of Investec plc and Investec Ltd’s current issued share capital.
