FTSE flat, DAX gains – miners rally despite China’s bank reserve hike
City Index December 10, 2010 3:24 PM
<p>The FTSE 100 traded largely flat on the day whilst the German DAX posted gains of 0.5% on Friday on low volumes as mining stocks rallied despite a move […]</p>
The FTSE 100 traded largely flat on the day whilst the German DAX posted gains of 0.5% on Friday on low volumes as mining stocks rallied despite a move by China to cool excessive growth by raising bank reserve requirements by 50 basis points.
The impending China move had out an anxious cloud over trading for the morning session and it seems now that they have made their move, somewhat earlier than expected with tightening predicted to come over the weekend, this is giving a lift to stocks in Europe. The move is also one that has not really surprised the market, being the third time this month China has raised reserve requirements and even more so after data showed this morning above consensus surges in import and exports.
Indeed investors tended to focus more on the better than expected growth in imports from China for last month than the reserve hike, and this meant that demand for mining firms in London remained strong in what was otherwise a rather uneventful session.
Whether or not there is more to come on fiscal tightening this weekend or indeed the near term remains to be seen given the unpredictability of Chinese fiscal moves of late.
The market it seems is taking the move by China to stabilise the equilibrium between import and exports within its stride as a sign of normalisation than demand deterrence giving mining stocks a lift.
European banks are the main drags on European Indices with Standard Chartered shares being hit by a downgrade from BofA/Merrill Lynch to ‘neutral’ from an original ‘buy’ stance. Banks across Europe have in truth have remained largely flat this week within tight trading ranges and this insinuates the anxiety that remains over potential exposures to any escalation in the European sovereign debt problems.
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.