European stocks indices gain, led by miners and banks
City Index May 26, 2011 7:18 PM
<p>European stocks are trading in positive territory for a second successive day as traders bought into riskier asset classes such as banking and mining stocks. […]</p>
European stocks are trading in positive territory for a second successive day as traders bought into riskier asset classes such as banking and mining stocks.
It is the three heavyweight sectors that are leading European indices higher today; oil, miners and banks.
The dollar weakness is helping to give rise to a small degree of diversification away from risk aversion and back into riskier asset classes such as the aforementioned equity sectors. However, with copper and crude oil prices lacking inspiration in trading, one can highlight today’s buyer interest in resource stocks as potentially born more out of bargain hunting given the recent heavy falls.
Banking sector bounceback?
There has been a firm bounce back in the banking sector however, and this does breed a bit of confidence back into a sector that has endured a horrible three months. The last three months has seen the UK banking sector lose nearly 20% as investors feared exposure to sovereign debt within the eurozone and fretted about stricter regulation. However, the banking sector has seen a bit of a return in demand, bouncing back 2% in the last two sessions.
That said, a broader picture of the banking sector tells a tale of consolidation, with the sector remaining within a 20% trading range since August 2009. With the banking sector having traded at the bottom of that range earlier this week, it is now seeing some support. Should banking stocks continue to see demand, this could help lift the sector back towards the top of its two-year trading range.
Man Group leads
In terms of individual stock movers of note so far, we have seen high demand for shares of Man Group this morning after the world’s largest listed hedge fund announced forecast beating results. The firm saw net assets rise 3% to $71 billion over the last two months and posted pre-tax profits of $599 million for the year, a near 7% better than the market had expected. With Man Group’s share price falling some 8% in the run up to these results, the outperforming theme has immediately jumped share prices by 3.6% higher and straight to the top of the FTSE 100 leader board.
On the downside today we have luxury fashion chain Burberry, whose shares have slumped 3.5% after the firm told shareholders it will ramp up its investment and this would likely hit profit margins. The retailer is set to invest £20 million in London in an effort to double its retail space and clearly this has been met with a rather short term reaction from shareholders in terms of where this will leave profit margins in the near term.
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