European stock markets charge higher by 2% led by miners and financials

<p>European stock markets enjoyed gains of 2% on Tuesday, with mining and financial stocks leading the way as investors added risk to their portfolios after […]</p>

European stock markets enjoyed gains of 2% on Tuesday, with mining and financial stocks leading the way as investors added risk to their portfolios after Alcoa’s earnings bore forecasts last night.

The FTSE 100 closed to gains of 1.5% on the day, slightly behind the DAX and CAC which both rose around 2.5%.

Alcoa is the traditional curtain raiser to the US earnings season and whilst its results are unlikely to set the tone for the entire results period in the US, the fact that it beat expectations helps to put European traders on the front foot. Alcoa, the largest US aluminium producer, reported a 6% rise in revenue to $6 billion, beating forecasts of $5.7 billion.

Alcoa’s results gave a natural lift to key miners on the FTSE 100 this morning, with Vedanta Resources, Antofagasta and Fresnillo all among the top 10 risers in early trade as a result. Mining stocks saw upside momentum carry into the afternoon session, with the FTSE 350 mining sector closing higher on the day at 3.5%, making it the best performing heavyweight sector in London trade.

Closely following behind the miners were heavyweight financial stocks, which also saw strong gains on the day after Fitch, the ratings agency, announced it did not expect it to cut France’s Triple A credit rating this year. The potential for France to lose its top notch credit rating has long been an uncertainty in shareholder minds of financial firms, and whilst today’s news from Fitch has not eradicated that fear entirely, given that most still look to Standard and Poor’s to make a comment on this issue, it has helped give financials a lift today.

The FTSE 100 has however been in a consolidation pattern for the past four trading days, with the UK index bouncing a bit like a cork in a bath, and whilst trading has been very positive today, the FTSE 100 needs to overcome resistance at 5750 and 5800 if it is find upward momentum.

For now however company earnings and updates both at home and across the pond are giving investors a chance to broaden the gaze of their focus from the sovereign debt crisis, though naturally many a focus remains entrenched in that issue. The meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy failed to really announce anything new and with Italian and Spanish bond auctions to come later this week, along with ECB and BoE rate decisions, investors continue to trade with a very short term bias.

Game Group shares plummet into the depths
Shares in Game Group plummeted over 40% on Tuesday after the struggling game retailer warned it may breach the terms of its loans after a bad Christmas sales period. The firm said sales were even worse than predicted over the last eight weeks, down 14.7%.

There is a chance that the firm could be close to the end of the road now, given the lack of bounce back in performance and confidence and the huge pressure share prices are under. This Christmas saw the firm at the Alamo, and in an effort to drive footfall to stores, price cut promotions failed dramatically, with sales even poorer than most had expected and what sales did go through the tills, they were at even more pressured margins. The share price tells a tale that shareholders have simply given up.

Marks and Spencer’s shares rally after update
Shares in UK high street retailer Marks and Spencer’s saw gains of 3% on Tuesday after the firm reported a 2.4% rise in group sales excluding VAT, with UK sales rising 1.8% as food sales hit record levels over the Christmas period. The firm warned that profit margins in its clothing range would be squeezed somewhat after giving price discounts to attract shoppers but said that full year guidance remained unchanged.

Debenhams shares surge 9% after update
Shares in Debenhams charged higher by 9% in trading after the retailer posted a better than expected sales performance. Underlying sales (excluding VAT) over the last 18 weeks remained flat when many had expected a fall of 0.9%, boosting shareholder hopes that the firm’s product diversity could keep it challenging on all fronts despite the tough economic conditions.

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