EU Indices mixed despite positive German EFSF vote and US GDP reading

<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.

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