FTSE 100 edges higher and pound skids below $1.23 after Draghi says ECB did not discuss extending QE

More than £340m was wiped off the value of cyber security firm NCC after it warned profit growth will be hit by a “number of setbacks” in its assurance division.

In its latest trading update covering the four months to September 30, the FTSE 250 group said it experienced three larged unrelated contract cancellations, a large contract deferral and difficulties with some contract renewals in the assurance unit.

Although management retained their profit guidance for the year, broker Canaccord Genuity thinks the setbacks will have “a significant” impact on half-year margins.

Meanwhile, Robin Speakman, of Shore Capital, urged a need for caution. “Clearly, a lack of visibility is set to weigh on the share price,” he said.

The mid-cap stock suffered its worst day on record, sliding 122.7p, or 35.5pc, to 223p.

It wasn’t the only FTSE 250 stock in the doldrums yesterday, profit warnings from Keller Group and Senior weighed heavily on the index.

Engineer Keller slumped to a four-year low after it warned on profits citing difficult trading conditions in Asia. Shares plunged 241p to 644.5p. Meanwhile, its peer Senior blamed lower demand for parts used in heavy truck production and oil and gas markets for its profit warning, prompting its worst day in 15 years, down 27.3p to 176.9p.

Temporary power provider Aggreko joined the laggards, falling 82p to 858p, on the back of a rating downgrade. Credit Suisse slashed its rating to “underperform” from “neutral” on competition concerns.

Analyst Carl Green said: “As the industry matures, we see further scope for margins and returns to be eroded.”

Elsewhere, consumer credit lender International Personal Finance bucked the trend jumping 30.6p to 300p after its digital business showed strong progress in the third quarter and it returned to growth in Mexico.

Meanwhile, a bullish broker note lifted shares in UK home assistance provider Homeserve 19p to 622p. After a visit to its UK and US operations, Barclays hiked its rating to “overweight” as it now expects “strong profit growth”.

On the wider market, the FTSE 250 dropped 95.5 points to 17,903.32, while the FTSE 100 edged 4.98 points, or 0.07pc, higher to 7,026.90.

Banking stocks charged to the top of the blue chip index buoyed by good results from US banks. Royal Bank of Scotland rose 6.3p to 186.3p, Barclays edged up 5.7p to 183.1p, Standard Chartered climbed 13.9p to 699.2p, and Lloyds ticked up 0.7p to 55.6p.

Airline stocks were also flying high after Germany’s Lufthansa raised its full-year earnings target. Postive read-across boosted British Airways owner IAG and low cost carrier easyJet by 7.8p and 8.5p, respectively.

Equipment rental group Ashtead was also boosted by a US peer, United Rentals. It hiked its outlook yesterday, sending shares 21p higher to £13.43.

Finally, investors tuned out of broadcasters. ITV became the biggest FTSE 100 laggard, down 6.6p to 173.2p, after Liberum cut its target price citing weak advertising trends and Sky dropped 31p to 825p as it hosted its capital markets day.

Although it said high single-digit revenue growth is sustainable, Neil Campling, of Northern Trust Capital Markets, cautioned: “The core of the business, Pay-TV, faces substantial risk in the future of a magnitude never seen before.”

On that note, it's time to close up for this evening. I'm back again tomorrow  with more markets coverage. 

After swinging between gains and losses during today's trading session, European bourses have ended the day in positive territory after ECB president Mario Draghi cooled any taper talk. 

By close of trading: 

• FTSE 100: +0.07pc
• DAX: +0.55pc
• CAC 40: +0.46pc
• IBEX: +1.26pc

 Joshua Mahony, of IG, said: "Today’s ECB meeting may go down as one which is remembered for what was not discussed rather than what actually was, with a two day meeting seemingly concentrating on avoiding the key topics rather than discussing them. With both the QE extension and QE taper topics being left to December, perhaps the most telling comments came when Draghi went off script to speculate that he felt an abrupt end to asset purchases was very unlikely. With just four months of QE left to run and no taper process in place, it seems that March 2017 will not be the final month of asset purchases. Mario Draghi would have been happier to put out a sign on the front door saying ‘come back in December’."

Shares in BHP Billiton have dipped 3p to £12.15 after it announced Jac Nasser will step down as chairman next year. 

Jon Yeomans reports: 

Jac Nasser, the chairman of BHP Billiton, will step down from the post next year, as the FTSE 100 miner's response to the Samarco disaster was now "in place".

The former Ford executive, who has chaired the Anglo Australian mining group since 2010, told the company's annual general meeting in London that he would not seek re-election to the board.

Mr Nasser, who has chaired BHP for six years, said he would leave BHP in "robust shape". "This is a great company and we will continue to adapt and thrive," he said.

The chairman revealed had he intended to retire last year but had postponed his decision after the Samarco accident.

Prior to his time with BHP, Mr Nasser was best known for a three-year spell as CEO of US car giant Ford, which was marked by a dispute with tyre maker Firestone.

Read more here

Banking stocks have climbed towards the top of the blue chip index this afternoon following the ECB press conference. 

Kathleen Brooks, of City Index, said: "Even though German bond yields and the euro appear to be pricing in the prospect of an extension to the ECB’s asset purchase programme, the Eurostoxx banking sector index has actually risen since Draghi started speaking . This index has come under pressure since the ECB announced its QE programme back in March 2015, however, this index has staged a decent recovery so far this month. QE and negative interest rates are perceived as bad news for the banking sector, as they weigh on the profitability of banks’ lending activities.

"The fact that European banking stocks appear to be resilient to Draghi’s dovish message, suggests that some investors may also believe that the ECB cannot extend its QE programme too far, and anyone looking for a long-term increase to the ECB’s asset purchase programme could be disappointed. This is worth watching, and we wait for more info from the ECB in a couple of months’ time."

Shares in Barclays rose 3.4pc, RBS added 3.1pc, StanChart made gains of 1.8pc and Lloyds advanced 1.3pc. 

Returning to the possibility of KitKategate, Tom Ough reports on Nestlé examining UK price hikes: 

First they came for our Marmite, then they came for our Kit Kats.

Nestlé, the food giant behind products like Nescafé, Aero chocolate and the famous four-fingered bar, is considering increasing its prices in the UK to compensate for the plummet in the pound's value.

The company's chief executive, Paul Bulcke, included price rises among a number of options as Nestlé wrestles with the devaluation of sterling.

Saying that Nestlé would only introduce price increasing "responsibly" and after speaking to trade partners, Mr Bulcke's comments will nevertheless raise fears that his company will follow Unilever in attempting to pass the currency burden onto consumers. 

Inflated prices of goods as a result of the falling pound against the dollar are expected to hit consumers from early next year.

Richard Baker, chairman of the British Retail Consortium, has said that price hikes are inevitable, with some sources saying "virtually every major brand" has plans to increase prices by double digit percentage points.

Continue reading here

The euro fell to a four-month low against the US dollar on Thursday, and helped the U.S. dollar index rise to a seven-month highs, after European Central Bank President Mario Draghi said the bank did not discuss ending bond purchases.

The ECB did not discuss at its latest meeting either ending its asset-buying program or extending it, Draghi said. 

“Draghi pushed back strongly against the idea that they could discuss tapering or adjusting QE and that weighed on the euro,” said Vassili Serebriakov, FX strategist at Credit Agricole in New York.

"The markets took (Draghi's comments) as a little bit dovish," he said.

Bloomberg had reported earlier this month that ECB policymakers were building consensus that quantitative easing would need to be wound down gradually when the central bank decides to end the program.

The euro  was last down 0.18 percent against the U.S. dollar to $1.0952, after falling as low as $1.0935, the lowest since June 24.

The FTSE 100 has now turned positive as we head into the final hour-and-a-half of trading, with banking stocks leading the charge higher after the ECB press conference. 

It is currently trading up 0.25pc at 7,039.79 - after floundering in the red for much of the day. 

MPs have approved a motion calling on the honours forfeiture committee to strip Sir Philip Green of his knighthood during a debate in the House of Commons this afternoon. 

Our political correspondent Laura Hughes has the latest: 

The proposal tabled in the Commons asked for the Honours Forfeiture Committee to recommend the billionaire businessman's knighthood is "cancelled and annulled".

Every MP in the House supported the non-binding motion and therefore no full vote was needed.

Ian Wright, the chair of the business committee said Sir Philip "took the rings from BHS’s fingers. He beat it black and blue. He starved it of food and water and put it on life support. “And then he wanted credit for keeping it alive.”

He described the BHS pensions sage as “one of the biggest corporate scandals of modern time”.

A former head of the honours system told the Telegraph last night that civil servants will find it hard to ignore calls to strip Sir Philip of his knighthood if scores of MPs vote to remove his title.

This is the amendment passed this afternoon:

"[This House] noting that Philip Green received his knighthood for his services for the retail industry, believes his actions raise the question of whether he should be allowed to continue to be a holder of the honour and calls on the honours forfeiture committee to recommend his knighthood be cancelled and annulled."

Head over to our live politics blog for more: Sir Philip Green 'beat BHS black and blue, starved it and put it on life support' say MPs as they approve calls to strip him of his knighthood

Deutsche Bank shares jumped on hopes that major Middle Eastern and Chinese investors were prepared to back the beleaguered lender if it decides to raise more capital.

Shares in Europe’s biggest bank climbed as much as 4.2pc after Germany’s Manager Magazin reported that members of Qatar’s royal family had struck an informal agreement with the Gulf state’s sovereign wealth fund, Abu Dhabi, and an unnamed Chinese investor to lift their combined stake to as much as 25pc if the lender decides to tap shareholders for more funds.

If the investors do pour more money into Deutsche Bank, they could push for a management shake-up, which could threaten the position of John Cryan, the lender’s British-born chief executive, the magazine said.

Deutsche Bank has been plunged into crisis and its shares have tumbled since the US Department of Justice demand the lender pays $14bn to settle an investigation into the sale of toxic mortgage securities in the run-up to the financial crisis.

Report by Ben Martin (Read more here)

Weak earnings report weighed on US stocks this afternoon when the opening bell sounded on Wall Street. Energy stocks also tumbled on the back of a slide in oil prices. 

At the opening bell: 

• Dow Jones: -0.19pc
• Nasdaq: -0.18pc
• S&P 500: -0.22pc

Claus Vistesen, of Pantheon Macroeconomics, says Mario Draghi "dodged bullets" during this afternoon's press conference, "more adeptly than Neo from the Matrix," he adds.

"QE extension has not been discussed, tapering has not been discussed, and the president reiterated that the governing council is waiting for the assessment of the “relevant committees” which will be available in December. Mr. Draghi added emphasis to this point by noting that the meeting in December will “definite the environment for monetary policy in coming months.

"We continue to think that the ECB will extend QE in December, by six months to Q3 2017. Elsewhere, the comment that “QE can’t go on forever” briefly stung bonds and lifted the euro. As we type, however, EUR is pushing new lows for the day and bund yields are back down, suggesting that markets broadly expect the ECB will need to extend its asset purchases to reach its inflation target. Comments that the governing council did discuss potential contingencies to deal with bond scarcity also hints that they are expecting to extend QE beyond March next year. 

Finally, the economic assessment was broadly similar to in September, albeit with a marginally more dovish tone on inflation. Mr. Draghi said that the ECB sees “convincing evidence of an upward trend in underlying inflation.” This adds to our conviction that the central bank will extend QE in December. 

In the middle of a riveting ECB presser, Donald Tusk said there will be no Brexit negotiations at the the ECB summit. 

Reuters has the details: 

European Union leaders will not engage in discussions or negotiations on Britain's exit from the EU with Prime Minister Theresa May during her first summit meeting on Thursday, summit chair Donald Tusk said on arrival.

He said he expected May to brief the other 27 leaders later but has ruled out negotiations until May formally launches the Brexit process. Tusk rejected suggestions the new premier would face a hostile reception and said talks would remain cordial.

On other matters, he said the EU should retain its options to sanction Russia over its actions in Syria and that he hoped Belgian resistance to signing a free trade deal with Canada could be overcome by Friday.

He warned, however, that the CETA deal risked being the last such accord for the bloc unless it improves its trade policies.

Fixed income investment manager James Athey, of Aberdeen Asset Management, says the press conference was not Draghi's "finest hour".  

"He really wanted to shut down any suggestion that the ECB is going to taper any time soon. But he what he actually did was to tell people to come back in December and see what the ECB thinks then. That will leave enough unanswered questions to keep bond markets volatile. An already nervous market will not take much comfort from his obfuscation today.”

 Meanwhile, Michael Metcalfe, global head of macro strategy at State Street Global Markets, said: 

“The ECB’s policy bias looks increasingly neutral. The countdown clock to the end of QE is now ticking just a little louder. An extension of the QE programme is still a possibility in December, but without a slowdown in growth or disappointing inflation data is by no means the given we assumed over the summer. While it will be a long-time before monetary policy begins to tighten, as with the BoJ in September, this is the beginning of the end of central bank support for government bond markets. A fact that will not be lost on holders of riskier peripheral sovereign debt, especially given ongoing potential and realised political turbulence in some countries.”

When asked if the ECB profited from last week's Bloomberg piece that the central bank was considering tapering its QE programme, Mario Draghi says he has no idea. 

And on that note, the press conference ends (and a little earlier than normal).

When asked about Prime Minister Theresa May's criticism of QE and low interest rates, and whether or not he thinks the independence of central banks is being threatened, Mario Draghi responds: 

"No, I don't feel threatened, and neither is the independence of the Governing Council ... threatened."

Can extraordinary policy support stay in place forever?

The answer is, of course, no, Draghi tells reporters. 

"We want a convergence which is self-sustaining. In other words, without the extraordinary policy support that's in place now."

When asked about negative interest rates, the ECB president says they don't hinder "transmission of monetary policy". 

When asked: To what extent are markets ready in the event of a major problem in financial system?

Draghi responded: "Rules in effect are enough to cope with a variety of situations."

Here's Mario Draghi's introductory statement to this afternoon's press conference: 

Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. We continue to expect them to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases. Regarding non-standard monetary policy measures, we confirm that the monthly asset purchases of €80 billion are intended to run until the end of March 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

Today we discussed developments since our last monetary policy meeting in early June. Following the UK referendum on EU membership, our assessment is that euro area financial markets have weathered the spike in uncertainty and volatility with encouraging resilience. The announced readiness of central banks to provide liquidity, if needed, and our accommodative monetary policy measures, as well as a robust regulatory and supervisory framework, have all helped to keep market stress contained. Financing conditions remain highly supportive, which contributes to a strengthening in credit creation. They continue to support our baseline scenario of an ongoing economic recovery and an increase in inflation rates.

At the same time, given prevailing uncertainties, the Governing Council will continue to monitor economic and financial market developments very closely and to safeguard the pass-through of its accommodative monetary policy to the real economy. Over the coming months, when we have more information, including new staff projections, we will be in a better position to reassess the underlying macroeconomic conditions, the most likely paths of inflation and growth, and the distribution of risks around those paths. If warranted to achieve its objective, the Governing Council will act by using all the instruments available within its mandate.

Continue reading here

 The euro hit a six-day high and bond yields rose on Thursday after ECB president Mario Draghi said the central bank had not discussed any plans to extend its quantitative easing programme beyond its scheduled end date in March 2017.

The single currency rose 0.5 percent to $1.1040, after hitting a three-month low of $1.0952 earlier in the day. The euro also rose more than 1 percent against struggling sterling.

German 10-year bond yields  --the euro zone benchmark -- rose 2 basis points to 0.06 percent, while most other euro zone yields rose between 2 and 4 bps on the day.

The STOXX Europe 600  equity index turned sharply lower as Draghi spoke, and was last down 0.6 percent.

Report from Reuters

It is clear that we will tell you in December what the ECB will do in the coming months, Mario Draghi tells reporters. 

The extension of QE was not discussed today and neither was tapering, ECB president Mario Draghi told reporters today. 

He said the could "did not talk about intended horizon of APP", before adding that the council remains the ultimate decision-maker. 

Here's how markets reacted after Mario Draghi said no discussion on extension of QE took place today: 

• UK gilt futures slide by around 20 ticks
• Euro rises above $1.10
• Stoxx 600 Bank index down 0.3pc
• German bund futures fall 48 ticks
• Euribor futures all 1-3 basis points across 2016-2019 strip

As expected, when asked if a discussion was had about extending QE, Draghi said no discussion took place today. 

Here's what Draghi said about the ECB's December meeting: 

"In December the Governing Council's assessment will benefit from the new staff macroeconomic projections extending through 2019 and from the work of the Eurosystem committees on the options to ensure the smooth implementation of our purchase programme until March 2017 or beyond if necessary."

ECB President Mario Draghi also said the ECB will preserve the very substantial amount of monetary support, adding that if warranted, the central bank will act by using all instruments in its mandate. 

In the eurozone, he expects the recovery to proceed at moderate but steady pace, but adds that fiscal stance in euro area will be broadly neutral in 2017. 

However, the recovery in the eurozone area will be dampened by subdued foreign demand, as risks remain tilted downside. 

The ECB's December assessment will benefit from new projections through to 2019 and committee work, ECB president Mario Draghi told reporters today at this afternoon's press conference. 

He said the central bank expects inflation to rise gradually over the coming months, but added that baseline scenario is subject to downside risks. 

He said: ""(Recent data) confirms a continued moderate but steady recovery of the euro area economy and a gradual rise in inflation in line with our previous expectations."

You can watch the ECB press conference here: 

The countdown commences. Just 15 minutes to go to the ECB press conference.  

Nick Kounis, head of macro and financial markets research at ABN AMRO, thinks ECB president Mario Draghi is likely to dismiss taper fears and "hint at action in December". 

At 12.45pm today, the ECB announced its decision to leave interest rates and QE unchanged.  

Claus Vistesen, of Pantheon Macroeconomics, previews the "difficult questions" he reckons Draghi will be faced with in 30 minutes time: 

1. Clarification of the "taper rumour" which stung eurozone bond markets last month;
2. When will a final decision be made on QE extension and parameters; 
3. If ECB intends to following Bank of Japan in setting a price target for long-term yields to try to engineer a steeper yield curve.

On the 'taper rumour', Mr Vistesen reckons Draghi will skirt the question and say that it was not discussed.  

Attention will now turn to the ECB press conference which takes place at 1.30pm.

Here's the full statement released by the ECB: 

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00pc, 0.25pcand -0.40pc respectively. The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.

Regarding non-standard monetary policy measures, the Governing Council confirms that the monthly asset purchases of €80 billion are intended to run until the end of March 2017, or beyond, if necessary, and in any case until it sees a sustained adjustment in the path of inflation consistent with its inflation aim.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

Some reckon the press release looks quite familiar: 

Claus Vistesen, of Pantheon Macroeconomics,also points out: that today’s press release is a copy of September document, "confirming our suspicion that today’s meeting won’t bring any major news".

"Overall, though, we expect Mr. Draghi and the governing council to lay the groundwork for a QE extension in December."  

Reuters have the full story: 

The European Central Bank kept interest rates and policy guidance unchanged on Thursday but may lay the groundwork for more easing to come in December as it tries to sustain a long-awaited rebound in consumer prices.

Holding interest rates deep in negative territory and maintaining bond purchases at 80 billion euros per month, ECB President Mario Draghi is likely to emphasise later at a news conference the continued need for monetary stimulus, reinforcing expectations for an extension of the ECB's asset buys beyond its scheduled end next March.

The ECB has provided unprecedented stimulus for years with sub-zero rates, free loans to banks and over a trillion euros in bond purchases, all in the hope of reviving growth and lifting inflation back to its target of just below 2 percent after more than three years of misses.

In a widely expected decision on Thursday, Draghi kept the deposit rate at minus 0.4 percent and maintained the ECB's guidance for rates to stay at their current or lower levels for an extended period. Attention now turns to the news conference at 1230 GMT, with markets looking for fresh hints about its expected move in December. 

The trick for Draghi will be to keep the door firmly open to more stimulus without any hint of commitment that could rattle markets and lead to a repeat of turbulence set off last year, when the ECB raised expectations too high and did not fully deliver on them.

Action is far from urgent, however. The euro zone economy is chugging along, inflation is at a two-year high, national budget proposals suggest a bit more fiscal support, and the early impact on euro zone economies of Britain's decision to leave the European Union has been muted. All these suggest that the 19-country bloc is on the path predicted by the ECB in September.

But Draghi and fellow board members have gone to pains in recent weeks to emphasize that this outlook is predicated on "very substantial" monetary support, a hint taken as confirmation that an extension is coming.

Indeed, ECB chief economist Peter Praet has warned that a premature withdrawal of stimulus would stall and reverse the upswing, a further sign any tapering is well into the future.

"Present loose (financial) conditions also reflect expectations of additional ECB action, this suggests that the ECB will have to do more just to preserve the current degree of accommodation," UniCredit economist Marco Valli said prior to the rate decision.

"Therefore, anything less than quantitative easing extension at 80 billion euros per month risks tightening financial conditions via higher yields, a stronger currency and, possibly, lower risk appetite."

The ECB's 1.74 trillion euro quantitative easing (QE) scheme is now set to expire in March but the bank has always said that it would run until it saw a sustained recovery in inflation.

Analysts polled by Reuters unanimously expect unchanged rates with the vast majority predicting a three to six month extension to asset buys in December.

The ECB has left interest rates unchanged as expected. 

• Headline interest rate: 0pc
• Deposit facility: -0.4pc
• Marginal lending facility: +0.25pc

It also said monthly asset purchases of 80bn euro are intended to run until the end of March 2017, or beyond, if necessary. 

 More to follow

 Lukman Otunuga, of FXTM,says investors are hoping the ECB can provide clues about a possible extension to the QE program.

He adds: "While it is widely expected that interest rates and the current 80 billion bond buying remains unchanged in October, the press conference where Draghi may be bombarded by taper questions could spark explosive levels of volatility. With European inflation still well below the golden 2pc target and unemployment hovering around 10pc, the taper scenario looks quite premature. It seems likely that the ECB adopts an inactive stance this month before potentially taking action in December when the new inflation estimates will be released.

"There still remains a growing weariness over the effectiveness of monetary policy to jump start economic growth and this is where Draghi enters the scene. Mario Draghi may attempt to keep the gates opened to more stimulus by reiterating his dovish mantra on how the central bank will do whatever it takes to revive economic growth. The “whatever it takes” signature statement has been heard many times and it is now a question if the markets are willing to listen."

95pc of economists expect QE to continue beyond March next year, while 90pc expect an announcement in December. 

Sterling edged down on Thursday after two consecutive days of gains on a trade-weighted basis, with worries about the manner in which Britain could leave the European Union keeping buyers away from the currency.

Data showing British retail sales recorded their strongest quarter of growth since late 2014 in the three months to September, with consumer sentiment remaining firm since June's Brexit vote, had little impact on the currency. 

Sterling was boosted on Tuesday, for example, after a lawyer representing the government in a High Court challenge over who has the right to trigger the divorce process between Britain and the EU said parliament -- not just the ruling Conservative government -- would "very likely" have to ratify any agreement. 

"Given what we've seen over the last few weeks, politics rather than fundamental data is probably going to be the most important driver," said UBS Wealth Management currency strategist Geoffrey Yu.

"And from talking to clients, what's driving sterling at the moment is less short-term data -- people are starting to shift towards what can happen to the inflation trajectory and how's that going to impact the Bank of England outlook."

The pound edged down 0.2 percent to $1.2268, having hit an eight-day high of $1.2334 on Wednesday.

On a trade-weighted basis, sterling was 0.1 percent down on the day, having hit an 11-day high on Wednesday . It was also down 0.2 percent at 89.525 pence per euro  ahead of a European Central Bank policy announcement.

Report from Reuters

Nomura does do not expect the ECB to make any final decisions on the QE programme today. 

However, the bank points to three possibilities when it comes to the ECB's press release due out in less than fifteen minutes: 

1. No details as to the future path of QE;
2. Indications about extending QE further;
3. Indications of approaching tapering.

With investor attention firmly focussed on this afternoon's ECB meeting, any decision by the ECB to extend QE beyond March 2017 makes scarcity more likely to be an issue in the European bond market.

 Dierk Brandenburg, Senior Sovereign Analyst, Fidelity International, said: "Investors in ‘safe assets’ are finding it increasingly hard to invest in positive yielding securities as the proportion of positive yielding assets compared to the entire asset class shrinks.

"Globally, safe assets amount to USD 27.3 trillion , a number that has been growing steadily as governments have stepped up their issuance to finance widening fiscal deficits. If we subtract all bonds already owned by central banks or with a negative yield, this leaves a pool of around USD 17.1 trillion (or 63pc of the asset class) in available, positive-yielding safe assets. At the same time, the demand for safe assets has risen due to regulatory constraints on banks and insurers as well as general risk aversion in the face of negative real yields."

"As a result of the sizeable quantitative easing (QE) programmes implemented by global central banks, the pool of available of safe assets is shrinking rapidly.

"With the European Central Bank (ECB) and Bank of Japan (BoJ) already owning 15pc and 38pc of their respective government bond markets, investors have begun to wonder whether there are enough safe assets in circulation to satisfy both central banks and investors.

"Monetary policy actually may not be too far from its limits and bond scarcity is an issue that central banks will soon need to address."

Ahead of this afternoon’s ECB meeting, analysts’ forecasts suggest there will be no change in policy.

Jeremy Cook, of World First, reckons the ECB is unlikely to see policy shifted today, but believes any changes will take place in December given “the access to fresh economic forecasts”.

He adds: “However, we think there is a decent chance that comments from Mario Draghi will be allowed to take the euro lower.

“Chatter about a ‘tapering’ of the European Central Bank’s bond buying program is somewhat premature in our eyes and we believe that Draghi will use the press conference to outline the Bank’s continual commitment to its easing policy.”

Meanwhile, Ipek Ozkardeskaya, of London Capital Group, also expects the ECB to maintain “the status quo”.

She said: “Investors need to know whether or not the ECB is planning to extend its monthly 80 billion euros worth asset purchases programme beyond March 2017. If the answer is positive, the next question is, how will the ECB grant the viability of the programme given the scarcity in eligibility bonds.

“German policymakers will certainly be among the leading opponents to an extension of the Quantitative Easing (QE) beyond the first quarter of 2017. The Bundesbank is obviously the most hit by the rush in the Eurozone bonds. The bank is due to buy approximately 344 billion euros worth of German government bonds, or regional debt, yet only 70pc of this amount is currently available on the market. Even a couple of non-state owned companies’ bonds yielded in the negative territories after the ECB announced the decision to shift towards corporate bond purchases earlier this year, on the back of a drying EZ sovereign pool. The abnormally distorted risk-to-return ratio across the Eurozone markets is a growing concern, and has perhaps  been the major reason preventing the ECB from announcing new measures at last month’s meeting.”

Elsewhere, Chris Beauchamp, of IG, says the ECB meeting will be “closely-watched” for any sign that the bank is looking to broaden its options with respect to more QE in coming months.

“Clearly the euro thinks looser policy is coming, as the currency slumps to its lowest level since July. The Germans might not be keen on further stimulus, but they’ll be even less keen on a stronger euro that hits exports, having already suffered this to some extent due to the fall in sterling, which will boost the price of German imports into the key UK market.”

Amid all the reaction to UK sales data, it is worth noting that the amount spent online rose by 22pc year-on-year, with the online platform now accounting for 15pc of overall retail sales in the UK. 

Laith Khalaf, Senior Analyst, Hargreaves Lansdown, said: "The rapid increase in internet sales shows the importance for retailers of having a strong online presence. Online sales now make up 15% of all retail spending, though less than 5pc of food retailing, which suggests this channel has scope to grow. This fact won’t be lost on the supermarkets, or indeed Amazon, who are currently trialling their own grocery delivery service in selected postcodes in London."

On UK retail sales, Barclays reckons the reality is that people are unlikely to have held back on spending just yet because people’s daily lives haven’t materially changed from before the referendum.

"Price inflation remains low for the moment, driven by ongoing supermarket “price wars”, with recent GBP depreciation only to be felt gradually next year in our view.

"Furthermore, employment has remained resilient so far and we only expect unemployment to rise at the turn of the year. Should this happen, we expect to consumers to tighten the purse strings."

Meanwhile, Roger Tejwani, Consumer analyst  of finnCap, said: 

"As sterling devaluation post the referendum pushes inflation above 2pc next year, softer employment and slower real wage growth may have a more negative impact over coming quarters, although a low rate environment and potential easing in the fiscal squeeze at the Autumn Statement could help to offset some of these effects.”

After dipping to an intraday low of $1.2255 against the dollar after the UK retail sales miss, comments by Brexit minister David Davis have lifted it back towards $1.23.

The Brexit minister, speaking to the UK parliament, said it was not for the UK government to determine what is the right or wrong sterling exchange rate. 

The comments follow remarks made last week by Mr Davis when he said there are a "large number of upsides" from the pound plunge following the EU referendum. 

It is currently changing hands at $1.2274 against the dollar, relatively flat on the day.  

Commenting on this morning's retail sales figures, John Hawksworth, chief economist at PwC, said:

“Consumer spending therefore remained supportive of overall GDP growth in the third quarter, with no clear signs yet of the Brexit vote having put a serious dent in spending.

"But the strong retail sales growth in July gave way to a flatter profile in August and September, so there has been some loss of momentum in the shops over the past two months that could pose concerns for retailers if it continues into the peak pre-Christmas period.”

Meanwhile, Fran Marwood, Retail & Consumer Partner, added:

"September's retail sales held up surprisingly well, driven by an unseasonably warm month and further falls in the pound, which boosted tourist spending. Despite softening performance in the sector, consumer confidence appears to be holding up well against the backdrop of the Brexit vote earlier in the Summer.

"Retailers, as we saw in the press with the recent Marmite row, will be seeking to handle the effects of costlier imports as currency hedges expire. An added dimension this year will be the split of Christmas spending between the high street and online as traditional businesses seek to remain competitive on price and manage an increasing cost base."

Samuel Tombs, of Pantheon Macroeconomics,said growth in retail sales is losing momentum after UK retail sales missed forecasts last month. 

He added: " Retailers now have finished passing on savings from lower import prices to consumers, and will soon begin to pass on higher import prices that have resulted from sterling’s depreciation. Although the retail sales deflator fell 1.2pc year-over-year in September, prices have been edging up since April. We continue to think that a sharp slowdown in retail sales growth lies ahead, as inflation soars and employment growth fades.

"As retailers pass on higher import prices to consumers next year, growth in retail sales volumes will slow sharply." 

The British government will do whatever is needed to ensure the stability of the financial services sector and markets during the process of negotiating Britain's exit from the European Union, Brexit minister David Davis said on Thursday.

Davis told lawmakers the financial sector, often referred to as the City of London, would be of great importance in the Brexit negotiations. When asked about a possible transition period after Brexit, he said all options were being examined.

"We have to treat as absolutely central to what we do maintaining the stability of both the City, but also the European financial markets ... we will therefore do anything necessary," he told parliament.

Report from Reuters

Analysts weigh in on the retail data miss and the strong third quarter figures: 

Howard Archer, of IHS, said: "While flat retail sales in September could be a sign that consumers are starting to rein in their spending as inflation rises, it should be borne in mind that sales were held back in September by warm weather markedly hitting demand for autumn clothing. Higher clothing prices were also seemingly a factor. Furthermore, retail sales were still very strong over the third quarter as a whole, and there could have been an element of some consumers taking a breather after splashing out over the summer."

Given UK retailers enjoyed their best quarter since late 2014, Mr Archer said that this fuels belief that "the consumer played a leading role in the apparent resilience of the economy following June's Brexit vote". 

Meanwhile,  Richard Lim, Chief Executive, Retail Economics said the latest figures confirm that spending has slowed on previous buoyant levels as continued weakness in clothing and footwear dragged on growth. 

"Consumers have been the cornerstone of the recovery so far and it’s difficult to see what will prop up the economy should a more widespread slowdown materialise," he added.

However, he warned that "darker clouds are forming on the horizon".

"As inflation accelerates more rapidly next year and the impact of a fragile jobs market transpires to weaker wage growth, disposable incomes will come under pressure."

It may have posted its best quarter since late 2014, but after UK retail sales fell short of expectations the pound extended its losses. 

It is currently trading at $1.2267 against the dollar, following the data release.

Here's a look at the key points from the latest UK retail sales data: 

1. In September 2016, the quantity bought (volume) of retail sales is estimated to have increased by 4.1pc compared with September 2015.
2. All store types except textile, clothing and footwear stores showed growth with the largest contribution coming from non-store retailing.
3. There was no change in the quantity bought compared with August 2016.
4. The underlying pattern in the retail sector continues to show relatively strong growth with the 3 month on 3 month movement in the quantity bought increasing by 1.8pc.
5. Average store prices (including petrol stations) fell by 1.1pc in September 2016 compared with September 2015; there were falls in average store price across all store types, except textile, clothing and footwear stores and petrol stations.
6. The amount spent (value) in the retail industry increased by 2.9pc compared with September 2015 and increased by 0.1pc compared with August 2016.
7. The amount spent online increased by 22.0pc compared with September 2015 and by 2.8pc compared with August 2016.

British retail sales recorded their strongest quarter of growth since late 2014 in the three months to September, but warm weather and higher prices dented demand for new clothing towards the end of the period.

Britain's statistics agency said consumer sentiment had remained firm since June's vote to leave the European Union, and that the sector would make a robust contribution to economic growth during the third quarter.

"The underlying trend is one of strength, suggesting consumer confidence has remained steady since June's referendum," statistician Kate Davies from the Office for National Statistics said.

In the three months to September, retail sales volumes grew by 1.8 percent on the quarter, the fastest rate since the fourth quarter of 2014 and up from 1.1 percent in the three months to June.

Compared with a year earlier, third-quarter sales volumes were 5.4 percent higher, again the strongest calendar quarter since Q4 2014.

But in September alone they disappointed economists' forecasts in a Reuters poll for a 0.4 percent rise, as there was zero growth. This, however, followed an upward revision to August's numbers to show sales held steady, rather than fell.

The ONS said the biggest monthly falls in sales were for clothing and footwear, which also dropped sharply in August. Higher prices, and unusually warm September weather which dented the demand for new autumn ranges, were behind the fall, it said.

Figures on Tuesday had shown the biggest monthly jump in clothing prices in several years in September, and the retail sales data showed the smallest drop in stores' prices in just over two years.

Economists are concerned this marks the start of a longer-term trend of rising prices which will eat into consumer demand, after sterling fell more than 15 percent following June's referendum.

Report from Reuters

Last month, UK retail sales increased by 4.1pc compared with the previous year, but fell short of expectations of a rise of 4.8pc. 

Retail sales volumes were flat month on month - again undershooting expectations of a rise in volumes of 0.4pc.

In the third quarter, retail sales rose 1.8pc compared with the previous quarter, that's it biggest quarter-on-quarter rises since Q4 2014. 

More to follow

The humble Kit Kat may be facing a price hike after Nestle said this morning it is weighing its options on pricing in the UK. Chief executive Paul Bulcke  said the UK team are looking at all possible actions to deal with the currency devaluation following the Brexit vote. 

Reuters has the details: 

Nestle will not adjust its investments in Britain because of Brexit before details of the country's exit from the European Union is clear, its CEO said on Thursday, though it is examining price rises to deal with a sharp fall in the currency.

"Let's first let the dust settle," Chief Executive Paul Bulcke said, adding that investments in the country were for the long term.

Regarding the currency, Bulcke said Nestle's UK team was looking at all options to deal with the fall in the pound, including efficiency efforts that can absorb part of it, and price rises.

The pound lost momentum in late trade yesterday, sliding below $1.23 overnight as Prime Minister Theresa May heads to the EU council summit in Brussels. 

Tobias Davis, of Western Union Business Solutions, said: "It is reported that her intent will be to build bridges between the UK and the EU, supporting recent statements that we are not leaving Europe. Let’s see how she stands up against Tusk, Juncker, Hollande and Merkel.

"Hollande has been pressing May to bring forward Brexit talks as he is ‘going to be busy’ next year preparing for an election, fending off right wing pressure."

It is currently changing hands at $1.2274, down 0.02pc on the day. 

Yesterday, it popped above the $1.23 mark after as Chancellor Philip Hammond attempted to reassure the City that it would be "a very high priority" in Brexit talks. 

It's not just Keller and Senior, the FTSE 250's biggest victim this morning is cyber security group NCC. Shares plunged 33.8pc this morning after it said its assurance division saw three large unrelated contract cancellations, a large contract deferral and difficulties with some managed services contract renewals. 

Robin Speakman, of Shore Capital, warns: " These 'icebergs' must clearly be navigated to meet full year forecast expectations. Management state that guidance is being retained for the present, but we anticipate a need for caution, likely leading to downgrades to our numbers. Clearly, a lack of visibility is set to weigh on the share price." 

Profit warnings from Keller and Senior have seen the pair nursing losses of 23.7pc and 20.9pc, respectively. Keller is set for its worst day ever, while Senior is poised for its worst day in 15 years. Kate Palmer reports: 

British engineering companies Senior and Keller lost nearly 18pc of their market value this morning after issuing downbeat trading updates, warning investors that full-year performance will be lower than they previously thought.

Shares in Senior, which makes components for Airbus and Bombardier planes as well as Ford engines, fell to their lowest point since 2012 after it said adjusted pre-tax profits dropped 18pc to £58.5m in the nine months to September 30.

Despite posting a 7pc lift in sales to £682.2m, the group's profits have been hit by lower-than-expected demand from aeroplane manufacturers and tough trading in North America.

The Hertfordshire-based group added that “certain supplier issues” had caused delays in the UK and US, and that attempts to increase prices in its aerospace business, which makes up more than two-thirds of turnover, were “not yet concluding and discussions are continuing with customers to bring these to resolution”.

The FTSE 250 engineer, which makes parts for the Airbus A350 and Bombardier’s CSeries jet, also said “challenging market conditions” had hit its flexonics arm, which makes components for trucks and the oil and gas industry. 

Continue reading here

Ahead of the UK retail sales data due for release at 9.30am, analysts weigh in on what to expect. 

Jeremy Cook, of World First, said: "Today’s retail sales numbers may further drive the narrative that the UK shopper is loading up on goods and services in anticipation of higher prices while areas of retail that benefit from increased tourism are expected to also do well. As we highlighted in response to Tuesday’s inflation numbers the impact of Brexit on the High St has not yet been felt; suppliers upping prices, businesses having to pay more in salaries courtesy of the government’s ‘living wage’ program and an ever increasing credit bubble could all pressurise sales volumes."

Meanwhile, Mike van Dulken, of Accendo Markets, said: "It’ll be interesting to see whether UK Retail Sales adds to the flow of post Brexit data that has done anything but signal panic and collapse since end-June. September is seen showing a retail rebound from a weak August although the annual rate is likely to have slowed."

It was a mixed bag in Europe this morning as a slew of profit warnings weighed on the region. In the UK, Keller and Senior both issued profit warnings, while German engineering group GEA also slashed its profit guidance for the year. 

• FTSE 100: -0.12pc
• DAX: +0.1pc
• CAC 40: Flat
• IBEX: +0.31pc

 Mike van Dulken, of Accendo Markets, said: "A flat opening call comes in spite of positive US and Asian sessions with investors interpreting Hillary Clinton as solidifying perhaps even extending her poll lead over Trump following last night’s final televised US presidential debate. The election is now less than three weeks away and the USD, as expected, has ticked higher, which could weigh on the FTSE, a Fed rate hike now more likely based on the perception of a more stable political leadership outcome." 

Tthe Mexican peso hit a six-week high after the final US presidential debate before the November 8 election.

In the third and final debate between Republican presidential candidate Donald Trump and Democrat Hillary Clinton, Trump tried to reverse the momentum in an election that polls show is tilting away from him.

"Never in the history of the U.S. has a candidate faced such a deficit in the polls as Trump currently holds, with at least two well-known sites (that model the probability of the outcome) putting an 85-90 percent chance of a Clinton win," Chris Weston, chief market strategist at IG in Melbourne, wrote in a note. "But as 2016 has shown us, not just in politics, but in markets too, it can often pay to expect the unexpected."

The US dollar held steady at 18.5027 Mexican pesos, after earlier touching 18.44 pesos, the lowest since September  9. It is down 2.6 percent this week against the Mexican currency.

Trump's radical positions on Mexican migration and trade could severely disadvantage the U.S's southern neighbour if he wins, so a stronger Mexican peso reflects lower market expectations of a Trump win.

In the debate, Trump refused to say whether he would accept the outcome of the November 8 election, after earlier urging supporters to patrol polling places in inner cities to prevent voter fraud. 

Trump and Clinton sparred over the influence of Vladimir Putin, with Clinton calling Trump the Russian president's puppet and Trump claiming Putin had repeatedly outsmarted Clinton.

Trump called Clinton "a nasty woman" and accused her campaign of orchestrating a series of accusations by women who said the businessman made unwanted sexual advances against them. He said the stories were "totally false".

Report from Reuters

Read more on the US Presidential debate here: Donald Trump refuses to commit to accepting election results as he clashes with Hillary Clinton in third and final presidential debate

Good morning and welcome to our live markets coverage. 

There are two notable events in focus today: UK retail sales figures and the ECB meeting. 

Retail sales numbers for August showed a small decline of 0.2pc but September's figures are forecast to show a strong performance for the UK economy in the third quarter. Forecasts suggest retail sales will rise by 0.3pc last month. 

Previewing the data release, Michael Hewson, of CMC Markets, said: "On an annualised basis UK retail sales are currently around 6pc, and over the past few years these sorts of levels have never been sustainable, which suggests that Q4 will see a much more cautious consumer in any case, so Brexit or not consumer spending would have likely slowed in any case."

Later in the day, focus shifts to the ECB rate meeting, where investors expect it to keep policy unchanged. However, markets will be keen to find out whether ECB President Mario Draghi will give any indication of if and when the central bank may begin tapering its bond purchase programme.

Keeping interest rates and an 80-billion-euro per month bond buying programme unchanged, Draghi will likely emphasize the continued need for monetary stimulus, reinforcing expectations for an extension of the ECB's asset buys beyond its scheduled end next March.

Mr Hewson added: "While we aren’t likely to get any joy today we could well see the ECB President start to prepare the ground for any potential move at the meeting in December, when the ECB updates its growth and inflation forecasts."

Also on the agenda today: 

Interim results: Lombard Risk Management

Trading update: London Stock Exchange Group, International Personal Finance, Segro

Economics: Public sector net borrowing (UK), CBI industrial order expectations (UK), Philly Fed manufacturing index (US), unemployment claims (US), existing home sales (US), CB leading index m/m (US), natural gas storage (US), PPI m/m (GER), current account (EU), minimum bid rate (EU), ECB press conference (EU), consumer confidence (EU)