EU Indices mixed despite positive German EFSF vote and US GDP reading
City Index September 29, 2011 10:13 PM
<p>European stocks were mixed on Thursday, with the FTSE 100 losing 20 points whilst peer EU Indices the DAX and CAC both saw gains of 1%. The headline of the day […]</p>
European stocks were mixed on Thursday, with the FTSE 100 losing 20 points whilst peer EU Indices the DAX and CAC both saw gains of 1%.
The headline of the day will be the fact that Angela Merkel passed an effective vote of confidence with a strong majority backing in the German parliament to pass new powers to the EFSF. Whilst the vote was expected to pass, the actual voting pattern shows that not only did Angela Merkel secure a much bigger majority than expected, but that also she was widely backed by her own coalition government when multiple dissenters were expected to vote against her.
The vote itself helps to re-affirm that perhaps German lawmakers are as not divided as they have publicly been seen recently, but then again, with the consequences of a no vote on the EFSF potentially very risky, we must take this vote with a pinch of salt.
It was a particularly choppy trading session however, with the FTSE 100 swinging between gains and losses throughout the day as traders reacted to both news from the EFSF vote in the German Bundstag and economic data out of Europe and the US.
European economic sentiment fell sharply in September, as expected, but fell slightly worse than consensus, coming in at 95, when a reading of 96, from a revised previous figure of 98.4 was expected.
It was however the final reading of second quarter US GDP that lifted the markets in the afternoon session, with the Q2 US GDP being upwardly revised slightly stronger than initially expected. US economic activity grew by 1.3% in the second quarter, from a previous reading of 1% and whilst the stronger reading will naturally help to ease fears of an aggressive slowdown in US growth, the positive market reaction told a story more about relief that there was no disappointment, than optimism of US growth. Indeed the GDP induce rally for European stocks was short-lived, with equity prices falling from their highs going into the close.
Weighing on trade in London was selling of the heavyweight miners, with the sector losing another 2% whilst oil firms also weighed despite a rise in Crude Oil prices today of 2%.
UK banks saw gains on the day however, keeping the FTSE 100 from falling further as a result, whilst gains were also seen for insurers such as Aviva.
Tata and Lyle shares rose near the top of the FTSE 100, rallying 3%, after the firm said that the encouraging start to the financial year had continued into the second half with solid demand. The company also expected to see another year of profitable growth. Tate and Lyle shares hit a new two month high on the back of the shareholder cheer created by today’s trading update.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.