European markets continue higher

European stock markets closed higher yet again on Monday after sharp US jobs induced gains at the end of last week.

By late morning, the FTSE 100 was trading higher by 4 pts at 5791, whilst French and German stock indices enjoyed stronger gains of 0.6%. Yet gains continued to find momentum in the afternoon session, helping the FTSE 100 to close higher by 21pts to 5808, above the important 5800 resistance level. The DAX and CAC enjoyed slightly stronger gains, rallying 0.8% whilst the Spanish IBEX continued to recovery strongly, closing 4.4% higher, marking a rally of 10% in just two days trading.

Leading the charge higher in London trade was the retail sector, which rallied over 1% early on led thanks to strong gains in shares of Marks and Spencer’s and Burberry Group. M&S shares rose over 2% thanks to a report in the Sunday Telegraph that bankers at a number of institutions were looking at the retailer as a potential £6bn bid target. Marks and Spencer’s shares were one of the most actively traded shares on the FTSE 100 today.

On the downside were shares of Centrica, whose shares fell 1% thanks in part to a downgrade in view on the stock by Deutsche Bank, who cut their rating to hold from an original stance of buy.

In late trading shares of Standard Chartered Bank fell 6% after news emerged that the New York State regulator had accused the bank of hiding $250bn worth of financial transactions by Iran. This new allegation immediately cast a dark shadow over both the banks reputation and its ability to conduct business in the state. With the news emerging late, it is likely that the bank could see extra volatility tomorrow when shares reopen for trading.

The rally we have seen in the FTSE 100 has been strong over the past week. Last week saw the UK Index gained 3% last week as better than expected US jobs data helped to counter disappointment from the ECB not acting to stimulate through additional bond purchases. The UK Index now is at threat of formulating a classic head and shoulders pattern with resistance at the 5800 level. In that sense it is going to be very important for the FTSE to maintain its recent bullish streak if a revisit of the 5900 and then 6000 levels are to be seen. Today’s close above the 5800 does however breed confidence that if the FTSE can maintain at current levels, the 5900 remains in sight.

Later in the week we will see a raft of data that is likely to play a role in whether the bullish momentum can continue. Bank of England inflation report due out on Wednesday will be scrutinized not just for a gauge of when UK growth will bounce back but also for the appetite of the Bank of England for more asset purchases through its quantitative easing programme. Later on Thursday we will see a raft of data out of China including Industrial Production and Inflation, which will likely give mining stocks a somewhat volatile edge as investors have another chance to gauge the slowing global growth story and likely Chinese monetary policy.

A venture above the $1.24 level for the euro/dollar cross rate was short lived this morning having hit resistance around the 1.2450 level.