FTSE bounces 3 as US data encourages bargain hunting

The FTSE 100 bounced back from a run of five days of consecutive losses to close higher by 3%, led chiefly by investors bargain hunting in some of the stocks that have been badly sold off in the last week.

Much of the bargain hunting has been triggered by better than expected economic data in the last 48 hours, despite UK GDP being downwardly revised to 0.1% for the second quarter. The afternoon saw US ADP employment post more jobs than expected last month, with 91,000 added when 75,000 was expected.

Later in the session stocks got a further boost by US ISM non-manufacturing data also beating consensus forecasts. US service sector activity slowed from August’s reading of 53.3 to 53.0 but less sharply than the 52.9 expected. The data sent US stocks into positive territory and this helped to boost UK equities into the close.

Investors have also taken confidence from the pledges by Angela Merkel and eurozone officials to support banks where liquidity issues arise.

It has been the miners and oil stocks that have been the main energy behind today’s FTSE recovery however, with both stock sectors rallying a strong 4%-5% on the day. The gains seen today in metal prices and crude oil has certainly influenced today’s higher demand for resource stocks and with the mining sector losing some 13% in the last five trading session alone, undoubtedly these losses have attracted bargain hunting today.

It remains to be seen whether today’s gains can be built upon more than the previous tentative rallies of the last month that faltered, having seen indices gain around 4%-5%. With most client positions being picked up on short term contracts, this leaves the flexibility for clients to switch positions quickly from today’s bullish action back towards the recent bearish bias.

SuperGroup shares crash 29%
Share prices in SuperGroup were sent crashing today, losing 29% in value after the fashion retailer reported that problems at its warehouse, where it had installed a new system, had meant that shops were likely to encounter supply shortages.

The news comes at a time when investors were already concerned that share prices, which had trebled after the IPO launched last year up until the start of this year, were overvalued. The IT warehouse issue is expected to cost the firm between £6 million-£9million.