European Indices fall 0.5% on profit taking – Rolls Royce lifted after statement

<p>Investors locked in profits on Monday after a rich run of gains that saw the FTSE 100 Index rally as much as 15% since the […]</p>

Investors locked in profits on Monday after a rich run of gains that saw the FTSE 100 Index rally as much as 15% since the start of September.

I get the feeling that there are many traders out there now looking at Indices that have rallied strongly and could be concerned that a correction may be coming. To this end, we have seen investors reduce some of their long positions and we have also taken on a number of sell orders seeking to capitalise should markets start to reverse and correct.

There is every possibility that having rallied so strongly since the end of the summer, traders may want to see a price correction before coming back into the market and setting portfolios up for an end of the year run.

Most of the profit taking has been focused on commodity stocks, with investors using the stronger US dollar and falling commodity prices as an excuse to lock in profits in heavyweight mining and oil firms.

We have also seen traders sell out of key banking stocks such as Royal Bank of Scotland and loyds Banking Group which have helped to lag the FTSE 100 further.

Rolls Royce shares stage late recovery on statement
Shares in Rolls Royce staged a recovery late in Monday’s session to finish in positive territory after shareholders bought back into the stock with more confidence after the company issued a statement confirming that the cause of the engine problem in the Quantas Airbus A380 focused on its Trent 900 engine. Investors hate uncertanty of the ‘unknown’ and it is this factor which had hit Rolls Royce shares hard recently. However, investors appeared to cheer the identification of the problem and bought back into its shares, lifting prices 2%. There is a hope that having now located the problem, the cloud of uncertainty over Rolls Royce may now be lifted.

Compass and Inmarsat key gainers
Shares in Compass Group have rallied to the top of the FTSE 100 leader board, hitting 540p and a new monthly high in the process. There is a vacuum of sincere news behind this move however and so technical factors may be the engine behind the move higher.

Inmarsat shares received a boost today after the firm reported better than expected third quarterly earnings.  The satellite operator reported an 18.4% rise in earnings, a few percent better than most analysts had expected thanks to growth in aeronautical services. The results are a timely boost in confidence to shareholders whose sentiment had been hit lately after shares fell as much as 27% from mid June and a key shareholder, hedgefund Harbinger, sold half its 28% stake ruling out a takeover offer in the process.

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