Early losses recovered as FTSE gains small ahead of BoE inflation report

The FTSE 100 quickly recovered early losses of 0.6% to trade higher within the first hour of trading on Thursday, though investors eyed the latest BoE quarterly inflation report due for release at 10.30am (UK time).

Broad gains were seen on two of the three key heavyweight stock sectors, oil and banking firms, and this helped to energise the FTSE’s recovery. Much of the recovery was also dictated by moves in Italian and Spanish bond markets, where yields retraced back from yesterday’s highs.

Ten-year Italian bond yields moved back below the important and unsustainable 7% level, whilst Spanish 10-year bond yields retraced back below the 6.3% mark as the ECB continued to intervene in bond markets to ease the cost of borrowing for Rome and Madrid.

The move again reaffirms the Central Bank’s vigour to contain the debt crisis in the interim and this helped to entice investors to pick up stocks, at least in the short term. Market rumours of a potential ECB rate cut next month also helped to entice investors into risky asset classes this morning, with the DAX, CAC and Italian FTSE MIB Index also seeing gains of between 0.7% and 1.7%.

A big focus however remains in the release of the latest quarterly inflation report from the Bank of England where traders will watch for any downward revision in growth forecasts and any more indications from the Central Bank that they will scale up asset purchases from the current additional £75 billion.

Fifteen points were also knocked off the FTSE 100 today as a number of companies, including Vodafone went ex-dividend .

Earnings from the London Stock Exchange and ICAP were the headline grabbers in London trading however, we both firms telling somewhat different tales.

LSE clearing revenue rises
The LSE saw a 20% rise in income to £386.5 million and profits rose 38% in the first six months of trading thanks largely to a strong bounce in income relating to their clearing business. Post trade was highlighted by CEO Xavier Rolet as a key underperforming area and shareholders have reacted well to the trading house announcing today that revenue from clearing rose 225%. LSE shares rose less than 1% on the day but remain firmly locked in a wide trading range between 760p – 940p.

ICAP shares lag FTSE after drop in EPS
ICAP, the world’s largest inter dealer broker, saw its shares being the key drag on the FTSE 100 today, dropping 4% after the firm reported a drop of 6% in earnings per share to 19.6p, which marginally missed expectations of 19.85p. The firm located the drop to disappointing voice broking activity in the last two months as investment houses reined in spending but believed that this would return to normal at the start of next year.