FTSE 100 gains 0.8% on commodity gains and bargain hunting

<p>The FTSE 100 gained 0.8% on Tuesday, recovering roughly half of yesterday’s sharp losses, with the index gains led chiefly by a strong performance in […]</p>

The FTSE 100 gained 0.8% on Tuesday, recovering roughly half of yesterday’s sharp losses, with the index gains led chiefly by a strong performance in heavyweight mining stocks after the price of copper rose 2% on the day.

Today’s index gains have been dictated largely by strong gains in the price of commodities, with the price of copper and crude oil gaining around 2% on the day. These commodity gains, boosted by the weaker US dollar, have given for heavyweight mining and oil firms listed in London and it is here that the energy behind today’s FTSE gains can be found.

There has certainly been a bit of bargain hunting also taking place today. The FTSE 100 has lost 5% in the last seven days of trading, with miners and the banking sector losing 7% and 10% respectively in the process. Naturally therefore these sharp losses in such a quick space of time have attracted bargain hunters and traders have made some tentative moves in these areas today as a result. That said, with the macroeconomic picture remaining quite uncertain, most of these bargain hunt moves has been speculative and placed on short term contracts. Indeed, whilst the rally in the prices of commodities today has helped to justify some of the speculative buys we have seen in the miners, the buys we have also seen in banks did lose a little pace after the initial morning surge.

Investor appetite for banking stocks was largely unaffected however by a weaker than expected set of results from Goldman Sachs. The US giant badly missed forecasts by reporting earnings of $1.85 per share for the second quarter, which missed most market expectations by some 19%, with the results badly hit by a sharp decline in trading revenues.

Lloyds Banking Group saw strong gains on the day remain into close, topping the FTSE 100 Index leaderboard with gains of 4%.

Today’s FTSE 100 price action is quite positive, yet more consecutive closes for the UK Index back above resistance levels of the 5800 and 5860 levels will be required to convince traders that the recent sharp equity falls may be only temporary.

Debt remains an issueThere does remain a big question mark however, over the standstill on ‘Capital Hill’ towards raising the debt ceiling, whilst traders are eagerly awaiting any resolution towards a second bailout for Greece from a meeting of eurozone finance ministers on Thursday. Indeed with German Chancellor Angela Merkel stating today that the meeting on Thursday will not be the final step, perhaps suggesting that the market may not expect to hear the final details of a second bailout for Greece. To that end, there may not be too much positivity to be read into today’s stock gains.

Johnson Matthey was one of the standout gainers on the day, with shares closing higher by around 4% after a trading update. The firm told shareholders this morning that they had seen a 19% rise in first quarter profit to £98 million, with sales rising 12%. Shares traded back above the £20 mark on the back of today’s higher share price demand.

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