| | Thursday 5 July 2012 QUOTE OF THE DAY I have never been in a situation where having money made it worse
- Clinton Jones
THIS MORNING IN LONDON FTSE 100 5,700.84 
16.37 0.29% FTSE 250 11,151.68 
-9.53 -0.09% FTSE 350 3,023.24
7.23 0.24% FTSE All Share 2,956.39
6.82 0.23% AIM 100 3,169.71
3.08 0.10% AIM All Share 696.33
0.54 0.08% 11:21 am
ON THE SHARECRAZY BLOG "Inflationary ghosts - will they come back to haunt us?" asks James Faulkner
Later this month (31st July), libertarians around the world will celebrate the birth of Milton Friedman, the greatest economist of the second half of the twentieth century. The main thrust of Friedman's work centred on challenging the erstwhile widely-accepted Keynesian position that there exists a trade-off between inflation and unemployment (an assertion articulated by the "Phillips curve"). Resurrecting the 'antiquated' concept of the quantity theory of money, Friedman contended that governments could increase employment (by increasing aggregate demand), but only at the expense of an accelerating inflation rate. The experiences of the 1970s largely vindicated Friedman's views, and 'monetarism' - the management of the economy through targeting the growth rate of the money supply - was accepted into the mainstream of economic policy circles.
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Stocks edge higher as BoE ups QE
- BoE increases QE, maintains Bank Rate
- ECB expected to cut refi rate to 0.75 per cent
- GKN jumps higher after 633m-pound Volvo Aero purchase
The Footsie was registering moderate gains in morning trade on Thursday as investors hoped that the Bank of England would inject more stimulus into the subdued UK economy; the central bank did just that with the Monetary Policy Committee (MPC) announcing additional quantitative easing at midday.
The Footsie, trading around the 5,700 mark this morning, has not closed above that level since May 3rd.
As expected, the MPC maintained the Bank Rate at 0.5% and decided to ramp up its asset purchase programme by GBP50bn to GBP375bn.
"Against the background of continuing tight credit conditions and fiscal consolidation, the increased drag from the heightened tensions within the euro area meant that, without additional monetary stimulus, it was more likely than not that inflation would undershoot the target in the medium term. The Committee therefore voted to increase the size of its programme of asset purchases," the MPC said.
Meanwhile, the European Central Bank (ECB) is widely expected to cut the refinancing rate from the current level of 1.0% this afternoon. Gerhard Schwarz, head of Equity Strategy at Baader Bank, said: "The most likely outcome in our view is a 25 basis point cut. A bigger cut would increase pressure on the ECB to move towards 'unconventional' stimulus - something the ECB has been very reluctant to do recently. So with the refi rate standing at 0.75% the ECB could still argue to have some firepower left."
FTSE 100: GKN surges after Volvo Aero acquisition
Shares in GKN rocketed after the announcement of its acquisition of Volvo Aero for GBP633m. To help fund the deal GKN aims to place GBP140m of new shares with institutional investors, with the rest of the money coming from new debt facilities.
Investec reiterated its 'buy' recommendation for the engineering group this morning, saying that 'The acquisition of Volvo Aerospace has been announced on terms that are better than anticipated in the media.' The broker said that while the cost equity raise are lower than expected, the expected returns are higher.
The decision by Xstrata to postpone the vote on its controversial proposed merger with Glencore International gave a boost to both stocks. The company said that the delay is due to the proposed changes to the management retention awards announced last month. Shareholders were due to vote on the the Xstrata-Glencore merger on July 4th.
Utilitiy giant Centrica fell after Goldman Sachs downgraded the stock to 'neutral' and cut its target price from 441p to 422p.
Insurance group Aviva rose after new Executive Chairman John McFarlane outlined details of its new strategic direction which, not for the first time, will result in changes at the senior management level. The new strategy has three main objectives: narrower focus; building financial strength; and improving financial performance.
Heading the other way was the under-pressure banking sector which was rocked by the LIBOR and mis-selling scandals last week. Barclays, the lender at the centre of the interbank lending rate manipulation claims, was trading slightly lower, while sector peers Royal Bank of Scotland, Lloyds and Standard Chartered were also out of favour.
FTSE 250: Dunlem sees strong Q4 sales
Homewares retailer Dunelm advanced after saying that total revenue increased 21.2% in the fourth quarter of the group's fiscal year, boosted by the unusually wet weather. However, the group cautioned that it expects consumer spending to remain under pressure.
Recruitment groups Hays and Michael Page were being weighed down by a gloomy trading update from AIM-listed sector peer Robert Walters. The group said that a banking sector slow-down in the Asia Pacific region put a dent in net fee income in the second quarter.
FTSE 100 - Risers
GKN (GKN) 210.20p +12.65%
Xstrata (XTA) 855.00p +4.17%
Glencore International (GLEN) 320.00p +2.55%
Aviva (AV.) 287.50p +2.17%
Rio Tinto (RIO) 3,199.50p +1.81%
Experian (EXPN) 940.50p +1.57%
Marks & Spencer Group (MKS) 334.10p +1.49%
Kazakhmys (KAZ) 762.00p +1.46%
BP (BP.) 436.50p +1.38%
Wolseley (WOS) 2,464.00p +1.32%
FTSE 100 - Fallers
Royal Bank of Scotland Group (RBS) 210.80p -1.72%
Kingfisher (KGF) 277.30p -1.49%
ICAP (IAP) 326.40p -1.39%
Evraz (EVR) 263.00p -1.31%
Whitbread (WTB) 2,064.00p -1.15%
United Utilities Group (UU.) 666.00p -1.11%
Centrica (CNA) 314.30p -1.07%
British Land Co (BLND) 509.50p -0.97%
Pennon Group (PNN) 754.00p -0.92%
Lloyds Banking Group (LLOY) 31.38p -0.90%
FTSE 250 - Risers
Gem Diamonds Ltd. (DI) (GEMD) 222.80p +5.39%
Chemring Group (CHG) 275.60p +3.11%
Dunelm Group (DNLM) 525.50p +2.64%
Ferrexpo (FXPO) 228.60p +2.42%
Cape (CIU) 274.80p +1.82%
New World Resources A Shares (NWR) 339.80p +1.77%
Persimmon (PSN) 637.00p +1.76%
Domino Printing Sciences (DNO) 561.00p +1.63%
Invensys (ISYS) 238.80p +1.62%
SIG (SHI) 101.90p +1.60%
FTSE 250 - Fallers
Michael Page International (MPI) 365.00p -3.92%
Man Group (EMG) 65.60p -2.89%
FirstGroup (FGP) 214.30p -2.68%
WH Smith (SMWH) 540.50p -2.35%
TalkTalk Telecom Group (TALK) 185.60p -2.32%
Home Retail Group (HOME) 84.05p -2.32%
Hays (HAS) 74.65p -2.29%
Yule Catto & Co (YULC) 142.00p -2.20%
Perform Group (PER) 395.30p -2.06%
Bodycote (BOY) 344.50p -1.99%
WHAT THE BROKERS SAY
THE LATEST ON THE CRAZY BOARD The top 5 hot company threads on the Bulletin Board: Norseman Gold Intimas Group BTG Border & Southern Running trading thread
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BOOK OF THE WEEK  By Rodney Hobson
A book review by Aaron Padgham of t1ps.com An equity investment usually offers two types of return, capital gain from the upward movement of a share price and income gain from a profit share, the dividend. The latter can be a valuable income stream for anymore, particularly in the current climate which has been characterised by record low interest rates. Rodney Hobson's 'The Dividend Investor' is the ultimate guide to maximising income through equity investments, guiding those who have grasped the basics of investing but are unsure on how to build a portfolio that produces a rising income stream.
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