Europe rebounds as investors cautiously eye Italian elections

<p>Markets across Europe rebounded in early trading on Friday recovering some of the steep losses from the previous volatile session. Stronger than expected German data […]</p>

Markets across Europe rebounded in early trading on Friday recovering some of the steep losses from the previous volatile session. Stronger than expected German data boosted market sentiment and investors moved back into riskier assets despite disappointing news from the European Commission and the uncertainty of the looming elections in Italy this weekend.

By mid morning the FTSE was trading up over 0.75%, the DAX had gained over 0.5% and the CAC was up 1.3%.

The German IFO Business Climate Index jumped to a surprising 107.4 in February, much greater than the expected reading of 104.7 and rising for the fourth straight month. Business confidence in Germany is at a 10-month high and supports the Bundersbank forecast that Germany will return to growth in the first quarter of 2013. This is the second round of extremely strong data out of Germany this week and compensated for the disappointing Manufacturing data Germany released yesterday.

Elsewhere in Europe investors concerns over the elections in Italy this weekend capped gains. There is a very real concern that should Silvio Berlusconi win the position of Italy’s new Prime Minister he may derail the austerity programme currently in place which would result in trouble for the euro and financial markets in general. So far this week the Italian FTSEMIB has dropped sharply, losing 2.9% in the previous session, however, today sees the index regain 0.8% in early trading.

News the European Commission has lowered its forecast for growth this year in the Eurozone to a contraction of 0.3% versus its previous estimates of growth of 0.1% had little effect on the market. The news was not surprising especially given the fact that the World Bank had also revised down its growth forecasts for the zone in January as had the IMF. Lack of lending and record joblessness has been blamed from the delay in recovery.

With a shortage of economic data due out this afternoon, investors will continue to digest the released European data whilst also looking towards any developments in news coming out of Italy.


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