European stocks gain on US earnings and seeming progress on debt ceiling

<p>European stocks gained for a second successive day, led once again by gains in the miners and banks as President Obama indicated progress is being […]</p>

European stocks gained for a second successive day, led once again by gains in the miners and banks as President Obama indicated progress is being made with agreements with the Republicans over deficit cuts and the subsequent raising of the US debt ceiling. Stellar earnings from Apple last night also brightened sentiment today, with tech stocks seeing a strong sector bounce as a result.

It is the miners and banks that are leading today’s index charge in a repeat of yesterday’s session.

Banks have had another stellar session, with the sector rallying some 2.3% on the day to post the best day of gains for the sector since the end of June. Barclays, Lloyds Banking Group and RBS have all seen strong price rallies of around 6% and 7% in the last two days, which is a strong bounce. It is a little too early to tell whether the last two days of gains is indicative of a change of sentiment however from the bearish theme of the last few weeks. Certainly the rather bullish earnings seen in the US has helped to convince traders to add risk to their portfolios this week, whilst seeming positive steps in the US to raise the debt ceiling and a calmer european bond market has helped give investors a bit more confidence.

However, we need to see the FTSE 100 consolidate back within its 250-point trading range between the 5860 and 6105 levels before we can be convinced that near term bearish sentiment may have changed. A close back above the 5860 level for the FTSE where resistance lies will help to put weight behind these two strong days of gains.

The mining sector has rallied by 1.8% in early trade before losing a little ground to trade 0.8% higher into the close, with BHP Billton leading the sector higher after reporting a 14% jump in iron ore output and telling investors that the firm’s recovery is well on track from the devastating weather experienced in Australia earlier this year. Coal output also came in better than forecasts, giving investors optimism that the miner can capitalise on growing coal demand. BHP Billiton’s share price rose 2.4% on the day after a successful session earlier this morning in Australia. Rio Tinto and Antofagasta closely followed BHP’s gains, both also rallying 2% on the day.

Apple’s stellar earnings last night have given a strong rise to technology shares across Europe. The maker of iPhones and iPads saw revenues more than double for the quarter to $7.31 billion. Shares in technology stocks rose on the back of Apple’s earnings, including that of ARMHoldings, which rose 4% to top the FTSE leader board in the morning session. Apples’ better-than-expected earnings follow a similar outperforming theme to that of IBM and traders will undoubtedly have heightened expectations for Intel, who reports later today too.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.