Agius resignation lifts Barclays shares FTSE rally gathers momentum

The FTSE 100 opened to gains of 41 points or 0.75% on Monday morning with Barclays shares immediately lifted after Chairman Marcus Agius resigned in the face of the libor manipulation scandal.

It’s hard at this point to foresee the end of the Barclays libor scandal purely with the resignation of Agius, but certainly it put to bed any question marks of the board’s determination to see its CEO, Bob Diamond, come through the swathe of calls for his own resignation. Focus will immediately switch to the Treasury Committee meeting on Wednesday, where Bob Diamond will face some difficult questions and depending on his answers, the uncertainty over his position as Chief of Barclays could re-emerge. For now, however, we have seen investors tentatively bargain hunt Barclays shares from their lows, lifting the banks share prices over 5% in the process.

Of course, regarding the libor scandal, we have only heard the Barclays end of the tales. We await further details of other banks involvements in similar libor manipulation and so even after Wednesday, this scandal would appear far from over.

From a sector perspective, we have seen the three heavyweight stock sectors; the miners, banks and oil firms, all gain ground and this is where the engine is behind the gains today, and indeed last Friday in the aftermath of the EU Summit. Lagging behind the rally is tobacco and pharmaceutical stocks which paint a picture that trading is playing out a theme of ‘risk on’ today.

Indeed, this week is likely to be all about two themes: the Bank of England rate and asset purchases decision on Thursday and US non farm payrolls on Friday. With the Bank of England expected by many to increase asset purchases by as much as £50bn and US jobs figures expected to bounce back from a poor 69,000 jobs increase last time around, these are two areas to which investor buying is likely to be impacted.

It’s the first day of a new quarter and so we are seeing some additional buying also lifting share prices as investors position their portfolios for the new quarter ahead.

We have also seen benchmark Spanish and Italian 10-year bond yields fall back further, with Spanish yields edging that bit closer to the 6% level, which marks some reversal having hit 7.19% two weeks ago.

There is the threat of a double top formation on the FTSE 100 and this could put a roof on the UK Index’s immediate rally if it fails to break above the 5620 level. A break out of this level could see the FTSE 100 target 5700, which is where the next resistance levels lay in wait.