FTSE 100 recovers from early losses on US data

The FTSE 100 recovered from sharp opening falls to trade flat on Thursday, with stocks receiving a bounce from better than expected data across the pond in the shape of weekly jobless claims and US home sales.

The FTSE has today outperformed its European bourse peers, who saw deeper equity falls such as the German DAX, which fell 1.4% on the day as investors reacted to poor European company earnings. Poor results from BASF and a warning by engineering giant Siemens AG that global economic risks were rising, continued a poor 48hrs performance for broader stock indices in Europe.

US data surprises to the upside
The large exposures to US activity that some firms have on the FTSEsaw the UK Index receive a boost from the stronger US data this afternoon. Weekly US jobless claims fell below 400,000 for the first time since April this year, a bigger drop in claims than the market was expecting. Whilst this was positive, weekly figures can be volatile and so it is important that investors do not read too much into this figure this time. It was the US pending home sales that was the real positive surprise on the day however, with US home sales rising 2.4% in June when a fall of 2% was expected by the market. The rise was completely unexpected and was enough to give the FTSE 100 an immediate jump of around 20 points to trade back into positive territory going into the close.

It was also a positive day for most of Europe’s banks despite poor earnings from Credit Suisse. The Swiss bank reported a poor second quarter performance in fixed income trading. Net profits fell well below analyst expectations of 1 billion Swiss Francs, coming in at CHF768 million with revenues from fixed income sales down by a very poor 76%, worse than some of the bank’s international peers. Credit Suisse shares fell 2% on the day.

UK and Italian banks however enjoyed a good day, with Barclays, RBSand Lloyds all rallying 2% on the day, whilst Italian Banks Intesa San Paolo and UniCredit also saw gains of 1%, providing some relief to shareholders after enduring more share price slides this week.

Italian bond auction shows investor confidence has waned
The Italian bond auction took most investors’ gaze in the morning session today. Bonds sold with high demand, generating some €8 billion, which helps to reaffirm the market interest in buying Italian debt. However, in a more accurate gauge how confidence in Italian debt has waned, the gross yield paid was 5.77% for 10-year bonds, the highest level paid for 11 years.