FTSE closes with gains of 0.6% after choppy trading day

<p>A successful Spanish bond auction and positive US economic data helped to encourage higher risk appetite but continued investor nerves over the debt crisis and […]</p>

A successful Spanish bond auction and positive US economic data helped to encourage higher risk appetite but continued investor nerves over the debt crisis and potential credit rating agency actions kept trading choppy, with the FTSE 100 retracing from gains of 1% in afternoon trade.

Despite the gains, volumes were uninspiring today and this makes today’s gains somewhat susceptible to reversals, particularly if we continue to see negative euro headlines emerge. However, the FTSE 100 has recovered somewhat from support levels, which is positive in the short term, but it is important that the UK Index remains above the 5330-5300 levels in the near term.

The FTSE rallied 0.6% on the day, matching similar gains in French stocks and closely behind the DAX, which outperformed broader Europe by rallying 1%.

A Spanish bond auction this morning, which showed strong demand and average yields fall from previous similar auctions, helped to encourage investors to bargain hunt some of yesterday’s badly beaten stocks. The bond auction is being seen in a positive light considering it comes at a time when sovereign bond yields have raced aggressively higher, including that of Italian 10yr bond yields which have retraced back above the 7% level, although afternoon trade saw Italian yields dip briefly back below the 7% level.

Economic data out of the US in afternoon trade also raised a bit of ‘muted’ market optimism. Weekly jobless claims fell unexpectedly from an upwardly revised figure of 385,000 to 366,000. New York State Fed Manufacturing also rose much higher than expected, hitting 9.53 from a previous figure of 0.61 and the Philadelphia Fed Business Index also beat market expectations, rising to 10.3, more than double the rise originally expected.

However, putting a dampener on the US data was a sharper drop in US Industrial Production than expected, with production falling unexpectedly -0.2% last month for the first time in seven months. It was the Industrial Production figure that helped to force stocks back from their daily highs in afternoon trade.

In terms of sectors, all three heavyweight FTSE 350 stock sectors; banks, miners and oil stocks, gained broadly 0.5% on the day. Insurers were however key gainers, led chiefly by shares of Old Mutual after the firm agreed to sell its Nordic business for $3.2bn, inspiring shareholders that it will help to boost their returns.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.