European rally supported by better than expected US jobless claims

The European markets had a choppy start to trading this morning following no action from the European leaders last night and a broadly disappointing set of European economic data. The FTSE however did manage a mid morning rally which was cemented after better than expected US jobless data early in the afternoon. This was a much needed rebound following the sharp sell-off in yesterday’s session which saw the FTSE up a respectable 1.8% in the final minutes of trading.

Although the meeting of European Union leaders last night provided nothing of substance, the markets did not show signs of surprise as the FTSE started the day on a positive note. However the weaker than expected manufacturing and Service PMI figures did knock investors sentiment, showing that even the strongest economies in the eurozone are not immune to the debt problem engulfing Spain, Italy and Greece.

With this in mind it is becoming more evident that short term strategies are being employed by traders who remain nervous about the long term prospects of European equities. With no concrete proposals arising and disappointing data, pressure will remain on both Merkel and Hollande as they attempt to put together a plan to prevent the Greek exit.

On the domestic front, it was also confirmed this morning that the UK remains in recession, with the revised figures from the Office for National Statistics showing a deeper contraction than originally expected, with Q1 growth slumping to -0.3% from the first reading of -0.2%. Despite this disappointing news, bargain hunters were on the prowl as precious metal miners, energy stocks and financials lead the advance.

Turning attention to the jobless data out from the US, investors responded well to the slightly better than expected jobless claims figures. Although the number dropped by 2000 to a seasonally adjusted 370,000, it is worth noting that the weekly claims have hardly moved over the past month, stuck in a uninspiring range from 368,000 to 372,000. This is a remarkable difference from the sharp net job growth seen in the winter months; however it does remain below the critical 400,000 level meaning that new entrants into the job market can be placed but a reduction on the 8.1% unemployment level seems unlikely. This information will without a doubt be prevalent in investors’ minds when the monthly employment figures are released next week.