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Stocks edge higher in early trade ahead of BoE decision

Article By: ,  Financial Analyst
February 9, 2012 11:00 AM

Stocks pushed higher in early trading but moves were choppy ahead of important Bank of England and European Central Bank rate decisions out at 12 noon and 12.45pm GMT respectively.

The FTSE 100 traded higher by 11 points or 0.2%, underperforming a broadly stronger upside move for French and German stocks, with the CAC and DAX gaining 0.5%.

All eyes are firmly locked on the BoE and ECB central banks today and their respective rate decisions. Whilst little movement is expected from the ECB, there is a weight of expectation towards the Bank of England today, with the market expecting the UK’s central bank to announce an additional £50bn in asset purchases as part of a second phase in quantitative easing. Any deviation from this could see the markets turn volatile, with the bigger risk to stocks maintaining their bullish form in the BoE failing to deliver upon market expectations.

The ECB rate is expected to be maintained at 1%, but the focus of the market may not simply be on rate decision but also on the statement from ECB President Mario Draghi that follows the announcement. It will be interesting to gauge the appetite of the ECB towards helping Greece, considering their current predicament and resistance to some of the Troika’s conditions upon austerity as part of their new bailout package.

Company earnings has been largely mixed in UK trading today, with strong results from firm BG Group countered by somewhat disappointing announcements from Vodafone and Rio Tinto.

BG Group’s share price rallied straight to the top of the FTSE 100, gaining 2%, after the energy firm reported a 40% rise in underlying profits for the fourth quarter, beating market expectations. Profits hit $1.48bn when most analysts had expected a rise to $1.11bn whilst production dropped marginally in the quarter, falling 1%.

Vodafone’s shares lost 0.4% after the telecom giant reported a rise in group revenues of just 0.9%, when the market had hoped for 1.1% growth. The miss, which was weighed down by tough trading in Spain and Italy – two economies struggling against their respective debt mountains – dragged on a brighter performance in emerging markets such as India, whilst Turkey also saw strong growth.

Earnings from Rio Tinto saw a somewhat mixed reaction after a big hit in its aluminium operations was countered by a surprising hike in dividend. Dividends were increased by 34% to $1.45 and this bred confidence that the firm remained in a strong position for growth. However, the dividend rise did mask a $9bn charge in its aluminium business.

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