Britain's top share index rose on Thursday after European Central Bank president Mario Draghi pledged to act if needed to preserve the euro, boosting sentiment among investors hoping for a fresh round of stimulus. Speaking at an investment conference in London, Draghi said the central bank was ready to do whatever it takes within its mandate to preserve the euro, adding that the euro area was much stronger than many acknowledged.
The comments sparked a share rebound across Europe, halting a four-day losing streak and offsetting earlier losses driven by weak results in the energy sector. "The market has responded favourably. There is an expectation about some action from the ECB and the Fed. All the market is looking for is some kind of signal that perhaps in a month or so we are going to see some easing," said NewEdge strategist Neil Marsh.
The market rally in anticipation of fresh stimulus, however, could mean markets are disappointed next week if central banks - including the US Federal Reserve - fail to provide a strong enough expansionary signal, said RMG partner and CIO Richard Stewardson. "Overall we think the current rally in the markets is all we are going to get assuming we don't get QE (quantitative easing) from the Fed next week. The ECB can't do that much because to do more than we expect is to print money, which it cannot do."
At the close, the FTSE 100 was up 74.84 points, or 1.4 percent, at 5,573.16, recovering from a one-month low of 5,498.32 points set the previous day. Volume was once again relatively weak, at 88 percent its 90-day daily average. Banks and miners were the session's best performers, adding a combined 17.6 points to the index as investors piled into both sectors, which fell earlier in the week.
Lloyds, however, did not join its peers and was instead down 0.5 percent, ranking among the FTSE's top losers after it reported weak results for its first half, kicking off earnings season for the banks. The shares were also hit by the bank's involvement in the Libor scandal after it received subpoenas from government agencies investigating interest rate rigging.
Poor earnings also weighed on Royal Dutch Shell, the session's worst performer and biggest individual drag on the FTSE. The energy heavyweight dropped 2.3 percent, after it reported a fall in second-quarter earnings to around $6 billion, hit by weaker oil prices world-wide and for gas in North America. Analysts' predictions had been around $6.3 billion
For others, however, the results season proved a boost. ITV shares rose 6.2 percent, leading the UK bluechips for most of the session in high trading volume, after the broadcaster reported better than expected revenues and said it expects to outperform in a broader TV advertising market on which it remains cautious for the rest of 2012.
Rolls-Royce shares gained 6.7 percent after the aircraft engine-maker posted a forecast-beating 7 percent rise in first-half profits driven by growing fuel-efficient jet demand. Unilever shares climbed 5.4 percent trading at over almost twice their 90-day daily average volume, after the consumer goods giant stuck to its 2012 targets helped by a strong performance in emerging markets.