FTSE enjoys best trading day since 2nd January

The FTSE 100 charged higher by 2% on Tuesday, boosted by heavyweight gains in insurers and oil stocks after strong earnings reports and heightened expectations that the ECB will move to cut interest rates soon after weaker than expected German economic data.

A key element to trading today has been about momentum. The FTSE 100 has been on an upward trajectory for most of the day, seeing strong upward momentum carrying the UK index back above the 6400 level.

To many, the fact that the markets have rallied on the back of weaker than expected data out of the euro area and specifically that of Germany may be somewhat perplexing. Yet it comes against the backdrop of a huge swathe of aggressive stimulus from multiple central banks to help support the global economic recovery. Investors’ appetite is there to see higher prices and many have taken the fact that German services PMI surprisingly contracted for the first time since November may now force the ECB’s hand. With Germany being the strongest economy in the euro area, any further evidence that their recovery is being hampered by weaknesses globally and from the weight of the Southern European nations is likely to concern the ECB and investors alike. Given the previously supportive measures from Mario Draghi, investors are taking the recent weakness in data as adding weight to the argument for a rate cut. Whether or not this speculation will be proved right however remains to be seen. The ECB next meets on May 2.

Strong corporate earnings has also helped to re-affirm investor appetite, with chip maker ARM Holdings leading the charge higher on the FTSE 100 after reporting a forecast beating figures. ARM said that first quarter profits jumped by 44% to £89.4m which beat analyst forecasts of £77.6m with revenues increasing by 28%. Shares jumped 11% on the day as a result.

Associated British Foods also saw strong share price gains of 8% after the firm projected that Primark, the discount retailer, would remain the UK’s fastest growing retailer this year after seeing a rise of 55% in operating profit for the last six months. Total profits came in at £496m which bear forecasts of £485m.

Despite the gains in blue chip stocks today, mining stocks bucked the trend, underperforming the broader index gains with stocks such as Fresnillo, Antofagasta and Tullow Oil losing ground.

Tomorrow see’s a heavy raft of economic data continue in full thrust with German Ifo survey, UK CBI distributive trades and US durable goods due out. On the earnings front, we have Barclays, GlaxoSmithKline, Standard Life, Sports Direct, Ford and P&G the standout firms set to announce their figures to the market.

Let’s not forget too, Apple reports to the market after the close tonight with expectations of a drop in earnings per share (EPS) to $10.01 from $12.30 a year ago.