Choppy trading as investors react to earnings and data

The markets continued to trade particularly choppy on Wednesday with gains fragile to reversals as investors struggled to pick market direction with data largely mixed, along with company earnings and a firm eye towards what Bernanke and the Fed may do at Jackson Hole on Friday.

The FTSE 100 swung between gains and losses to trade near flat after the first hour of trading before rising 20 points in the day by mid morning, whilst the DAX outperformed broader European trade by posting gains of 1% whilst the CAC also saw gains of 0.7% on the day.

Trading is likely to remain choppy this week, with investors jostling to position themselves ahead of a potentially hectic end to the week with UK, US GDP to come, along with the meeting at Jackson Hole. Clearly investors are hoping that they will hear some form of QE announcement, mimicking last year’s meeting, and this is helping to keep indices somewhat supported. That said, it can be a dangerous game second guessing what may come from Jackson Hole when investors have already been largely disappointed by the actions taken by governing bodies, particularly the measures recommended by Angela Merkel and Nicolas Sarkozy recently. This is likely to keep the markets choppy throughout the week.

The morning’s trade was dominated by reaction to German IFO business climate data, which came in below market forecasts to record a drop to 108.7, with expectations also falling sharper than expected to 100.1. The fall in confidence is of course no real surprise given market conditions in August, but in what has seemed a trend this week, investors had feared a sharper drop than the one that was published and as such, German stocks saw support, with the DAX rising over 1% in the immediate aftermath of the data being released. Data also showed a surprising drop in Eurozone New Orders of 0.7%, when a small growth of 0.5% has been expected. Again, the market reaction was somewhat muted to the disappointment.

Earnings watched – BHP Billiton higher, Tullow Oil leads

From a sector perspective, it is the miners that are helping to keep the FTSE 100 afloat today, with the FTSE 350 mining sector rallying 1% in early trade, recovering some of the ground lost when miners were sold off in yesterday afternoons trade.

The banks and oil firms, both heavyweight sectors saw smaller gains with losses seen in the Tobacco sector and British American Tobacco the main drag on the Tobacco sector, losing 1.3%.

Helping to lead the miners higher was BHP Billiton, whose shares rose around 1% on the day after the miner reported a 62% jump in profits to $10.98bn for the first half of the year. The numbers actually missed analyst forecasts of $11.7bn but this disappointment was countered by a bigger than expected increase in dividend to 55 cents when earlier expectations were for a dividend of 51 cents.

Shares in Tullow Oil lead the FTSE 100 list of gainers with shares rallying 6% after the firm reported a 312% increase in half year profits to $540m and doubled their dividend. Shareholders have cheered the report from the oil explorer and as such, shares have been well supported today.