FTSE 100 rallies 0 4 on bargain hunting

The FTSE 100 rebounded from Tuesdays near 2% losses as bargain hunting in heavyweight mining stocks, one sector that fell heavily in Tuesdays sell off.

The bargain hunting helped to lift the FTSE 350 mining sector 0.8% on the day and this is where much of today’s gains on the UK Index has been dictated from. That said, eye’s remained fixed on the Greek bond swap participation rate of the PSI ahead of tomorrow’s deadline and any likely implementation of Collective Action Clauses (CAC) should a low take up emerge.

There are concerns about a low take up of the Greek bond swap ahead of tomorrow’s participation deadline, which is a key part of the debt deal for Greece. Greece is seeking a participation target of at least 75% to help cut its private debt burden by 53.5% and if it fails to gain this participation rate, it has threatened to action Collective Action Clauses (CAC’s) to enforce a take up, which could put them in selective default territory. There is also speculation, albeit rumours, that they could extend the deadline past tomorrow to secure a higher take up rate should the numbers fall short.

The key element here is uncertainty, and investors hate uncertainty, which helps to justify – to some degree – the sell off witnessed in the markets yesterday. It is this uncertainty that is also convincing that today’s gains could be short lived given the fact that most of the buying we have seen today has been placed on short term contracts.

Economic data mixed
Slightly better than expected data out of the US today also helped to entice bargain hunting in European stocks despite a shocking fall in German Industrial Orders. US ADP employment rose 216,000, slightly higher than the 208,000 expected, and this breeds confidence that perhaps Fridays all important US non farm payrolls could be equally strong. The US data helped to counter any negative sentiment triggered by a surprising 2.7% fall in German Industrial orders, when growth was expected to slow to 0.5%.

Admiral Group shares rise over 10% after better than expected earnings 
Shares in insurer Admiral Group rose over 10% to the top of the FTSE 100 leader board after the firm reported better than expected full year profits. Full year profits came in at £299million, which was better than the £289m the market had expected after the insurer issued a profit warning in November last year which triggered sharp falls in its share price. Just six months ago, investors had expected to see profits for 2011 come in at £324million before the firm admitted that they had been hit by higher than expected personal injury claims.

The statement from both the chairman and CEO of Admiral Group attempted to draw a line in the sand for 2011; claiming it had not been a bad year, but rather a year where they failed to achieve as much as they had hoped for.

Given that Admiral’s share price fell 44% in 2011, the 11% rise in share prices this morning, which means that shares this year have already rebounded 31%, shows that investor confidence is returning.