European indices trade higher for fourth day in a row

<p>Traders continued to buy into equities on Tuesday, helping European indices trade higher for a fourth session in a row. The FTSE 100 has now […]</p>

Traders continued to buy into equities on Tuesday, helping European indices trade higher for a fourth session in a row.
The FTSE 100 has now recovered some 3.5% over the last four sessions, whilst the German DAX has rallied 4.5% within the same period. Both Indices remain some 5% off their 2011 highs and investors are nearing the point where they may be enticed into locking in their gains in case any more instability from North Africa or the Middle Easy rocks equity markets. This could therefore make the next few days interesting as it could help to determine whether investors believe the recent strong equity gains are to be short lived.

Sector wise, we have the energy and banking firms leading the charge higher, with Royal Bank of Scotland the top performing equity on the FTSE 100. RBS shares have rallied 2.4% in early trading to reach 42.4p, having bounced from the 40p level last week.  Shares in Cairn Energy have also been lifted after the firm said that it expects the Vedanta transaction to be given the green light.

On the downside however, shares of Johnson Matthey have slumped 3% to be the main lag on the UK index, whilst GKN shares have also fallen on reports in France that the firm is amongst a number of companies to have submitted a bid for French aerospace equipment maker Latecoere.

Sterling charges to new 13-month high on inflation data
The pound sterling charged to a new 13-month high today after data showed that UK inflation continued to charge higher, reaching 4.4% – more than the market had expected and still more than double the Bank of England’s 2% target. Today’s data piles yet more pressure on the Bank of England to hike interest rates, placing them in an incredibly tough position on the eve of tomorrow’s Budget. There is every chance that higher commodity prices, triggered by events in the Middle East and Libya, could push inflation even higher to the 5% mark and at that point, the Bank of England could be facing a crisis in confidence by the market.

The inflationary data has helped to charge the pound sterling higher to a new 13-month high above the $1.63 mark as investors bet that UK rate hikes are likely to come sooner than later.

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