FTSE flat, DAX gains – miners rally despite China’s bank reserve hike

<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.

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