LONDON MARKETS: FTSE 100 Ends At 5-week High After ECB Decision

By Carla Mozee, MarketWatch

Benchmark keeps win streak alive; Article 50 hearings in final day

U.K. stocks finished a five-week high Thursday, rising alongside European equities after the European Central Bank said it would continue to buying government bonds at an adjusted pace through next year.

The FTSE 100 rose 0.4% to close at 6,931.55, its highest settlement since Oct. 31, according to FactSet data. All but the industrial sector finished with gains. The index marked a fourth straight advance, the longest winning streak since late September. On Wednesday, it jumped 1.8%. (http://www.marketwatch.com/story/ftse-100-climbs-1-powered-by-mining-shares-2016-12-07)

Stocks had sagged early as investors waited to hear what the European Central Bank would do with monetary policy at its last meeting of 2016. During afternoon trade, the bank, led by President Mario Draghi, decided to keep buying government bonds through December 2017, but by EUR60 billion a month starting in April. Right now, the ECB purchases EUR80 billion in bonds a month.

While London-listed blue-chips rose, stronger gains were seen in the broader European equity market , with Germany's DAX 30 jumping to its highest settlement of the year.

U.K. stocks have benefited from the ECB's bond buying in the eurozone, as proceeds from selling debt have been used to buy British equities and other assets. The eurozone is the U.K.'s largest trading partner.

Read: European stocks at 11-month high, euro whipsawed as ECB extends bond buying (http://www.marketwatch.com/story/european-stocks-edge-higher-as-ecb-decision-looms-2016-12-08)

Among London-listed bank shares, Royal Bank of Scotland PLC (RBS.LN) rose 1.4% and Lloyds Banking Group PLC (LLOY.LN) swung higher to end up 0.8%. Barclays PLC (BCS) leapt 1.8% after Jefferies upgraded the lender to hold from underperform.

But Asia-focused banks HSBC Holdings PLC (HSBA.LN) (HSBA.LN) and Standard Chartered PLC (STAN.LN) fell 0.5% and 2.7%, respectively.

The ECB also said it would now be able to buy debt yielding less than its deposit rate of minus 0.4%, which widens the pool of available bonds to purchase. Such purchases are an option, not a necessity, Draghi said at a press conference.

"The prospect of tapered monthly purchases and lower-for-longer negative yields means that the ECB's reflation channels have shifted in favor of a weaker euro and higher equity markets, with negative discount rates and a cheaper exchange rate clearly benefiting stock valuations," wrote Lena Komileva, chief economist at G+Economics, in a note.

Movers: Capita PLC shares (CPI.LN) tumbled 14%, with its biggest decline since Sept. 30 spurred after the support services firm cut its 2016 profit forecast (http://www.marketwatch.com/story/capita-lowers-profit-guidance-starts-cost-cutting-2016-12-08) and said it is selling some of its businesses that no longer fit its core business strategy.

The planned disposal of its Assets Services division "may be due to it being viewed as non-core, but it accounts for nearly 10% of revenues, is one of the biggest contributors to underlying profits (16%) and appears to be performing 'well,'" wrote Mike van Dulken, Accendo Markets's head of research.

"Further government-inspired Brexit uncertainty and clients shying away may also even mean that further profits warnings can't be excluded either," he added.

Advertising firm WPP PLC (WPP.LN) ended 4.6% higher following a ratings upgrade to buy from hold at Jefferies.

TUI AG rose 4.4% after the travel-services company posted a rise in fiscal-year profit (http://www.marketwatch.com/story/tui-profit-rises-trading-in-line-with-expecations-2016-12-08) and its dividend. It also said trading is in line with expectations over the winter.

Among midcaps, shares of William Hill PLC (WMH.LN) dropped 6%, with The Times newspaper (http://www.thetimes.co.uk/article/cut-betting-terminal-stake-to-2-mps-demand-kl6lkqjvj) reporting that a cross-party group of U.K. lawmakers will demand stricter controls on betting machines.

The pound was buying $1.2575, down from $1.2621 late Wednesday. Thursday was the last day of hearings at the U.K.'s Supreme Courts, where government lawyers are seeking to overturn a November ruling that parliament must approve the start of negotiations over the U.K.'s exit from the European Union.

The government argues that it has the authority to trigger the so-called Article 50 process without having to seek approval from lawmakers. A decision will come "as soon as possible," the BBC on Thursday quoted Supreme Court President David Neuberger as saying (http://www.bbc.co.uk/news/uk-politics-38247937).

(END) Dow Jones Newswires

December 08, 2016 13:34 ET (18:34 GMT)

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