European stocks climb after four day slump as retailers lead charge

European stock indices moved higher in early trade on Friday after suffering four days of straight losses, with early gains charged by a rally in retail firms such as Kingfisher and Next. The FTSE 100 and DAX Indices both rallied 0.5% within the first hour of trading. BT Group shares were the outstanding stock performer in early trading, with the firms shares rallying near 6%.

The fact that the FTSE 100 managed to close above support levels at 5840 yesterday and today’s muted amount of bargain hunting is a positive sign that bargain hunters may continue to look at stock price weakness as buying opportunities, regardless of the concerns about slowing global growth after very weak manufacturing data yesterday from China and Germany. It is a Friday today of course, and therefore volumes are likely to be on the thin side, which means price moves may be exacerbated somewhat and true market sentiment can be rather clouded.

BT Group pension deal supports shares
Of the early stock movers was BT Group, whose shares rallied nearly 6% after the telecom giant said it will pay £2bn into its pension fund this month as part of a nine-year deal. BT reached an agreement with the Trustee of the BT Pension Scheme which meant that pension funding deficit has been agreed to be £4.1bn as of 30 June 2011, compared to a previous valuation of £9bn in December 2008. The deal helps to remove a large cloud of uncertainty that has weighed on BT’s shareholder sentiment for quite some time and helps to draw a line under the issue, although a deal had long been expected to be reached. BT Group’s shares rallied to their highest level since May 2008 at 234p.

Retailers charge higher
Gains in retail stocks also helped to provide a large weight behind the FTSE’s rally this morning, with solid gains seen in shares of Kingfisher and Next on the back of positive changes to broker guidance. Next shares rallied 2.3% after Deutsche Bank, Barclays and Nomura all hiked their guidance on Next’s shares performance. Deutsche upgraded their share price target for Next to 3280p from 3100p whilst Barclays and Nomura also hiked their price target for both Next and Kingfisher shares. The positive broker action has helped to convince investors to add to their holdings of both firms today.

Randgold shares continue to slide on Mali uncertaintyRandgold resources shares continued to slump on the uncertainty surrounding the situation in Mali, where the miner has operations. Despite the firm stating yesterday that their operations are running normally, investors have continue to wind down some positions today, albeit nowhere near to the level of yesterdays 12.5% share price loss. Randgold shares lost a further 2% this morning.

With yesterday’s economic data disappointing, investors will watch more housing data out of the US this afternoon in the shape of New Homes Sales due out at 2pm GMT. Expectations are for a small rise to 325,000 from a previous figure of 321,000 with the top end of expectations being 345,000.