European markets close positive as they prepare for turmoil

A positive start set the trend for the rest of the trading session with the FTSE barely crossing into negative territory throughout the last trading session prior to the Greek elections on Sunday. Following in the footsteps of Wall Street, European markets opened higher on news that Central Banks were prepared to support the strained markets after the elections in Greece should it be deemed necessary?

“We must do everything possible to prevent the eurozone falling apart” comments made by the Dutch Prime Minister highlighted the sense of crisis and tension engulfing the European leaders as they struggle to find a way out of the deteriorating situation. The ECB hinted at an interest rate cut and made it clear it was ready to step in and fund any eurozone bank that gets in trouble. Furthermore authorities in Tokyo suggested they would respond with decisive intervention if the yen soared as did Swiss National Bank.

Here in UK the BoE included an announcement of £100 billion offer of loans to banks to encourage them to lend more to companies. All this talk of steps to stabilize the markets if necessary sat well with investors and the Banking sector held strong throughout the day. RBS gained 8.7% in one of its most lucrative trading sessions this year. Lloyds and Barclays also put in a strong performances gaining 5.2% and 3.9% respectively.

Other riskier sectors also performed well, with mining stocks also climbing steadily thanks to dollar weakness making commodities cheaper. Vedanta, Fresnillo and ENRC all rose over 5%. The push towards the riskier classes, even though it could be short term, goes to demonstrate that investors feel assured by the pledges made by the central banks.

The focus as we go into the weekend is squarely on the Greek Elections, however it is important to remember that it is not a binary event, difficult times are going to continue for the eurozone after the elections. For further debate please read Joshua’s blog.