FTSE gains on muted Greek optimism; non-farm payrolls eyed

<p>UK stocks continued to recover on Friday, with investors cautiously optimistic that the Greek government has backed down on its referendum pledge, which threatened to […]</p>

UK stocks continued to recover on Friday, with investors cautiously optimistic that the Greek government has backed down on its referendum pledge, which threatened to derail much of the agreements made in Brussels last week.

The FTSE 100 rallied some 0.6%, led chiefly by gains in heavyweight miners and banking stocks, whilst the CAC traded flat and the DAX saw small losses.

Despite the muted optimism seen in financial markets, the Greece situation remains on a knife edge and can turn at any minute it seems, and this is making investors extremely sensitive to the news flow out of Athens and making trading choppy.

Whilst it seems the Greek PM has backed down on his pledge to hold a referendum on the EU bailout deal, the political situation in Greece remains highly unstable, making fiscal policies unpredictable. It is speculated that PM George Papandreou will step down and be replaced by a new and stronger coalition government (or national unity government), if he passes a crucial confidence vote late this evening. It is predicted that should he survive the confidence vote, a coalition government would take control for a transitional period before elections are called.

That said, much relies upon bi-partisan talks between Mr Papandreou and opposition figures today, and given the fact that the situation is seemingly changing so quickly, investors are unwilling to bet big on a smooth vote this evening. The dissent from Mr Papandreou’s own party, including the very public outbursts on his leadership from his very own finance minister, is likely to keep investors on their toes.

There is also a big focus towards the release of US jobs data at 12.30pm (UK time), where it is expected that the number of new payrolls will fall slightly from September’s surprisingly strong jump. A stronger reading could help douse the flames of fear that the US economy is slowing rapidly and ease concerns that the Fed is not doing enough to counter the apparent slowdown.

Royal Bank of Scotland shares jump on update
RBS shares rallied 3.5% on Friday after the UK bank announced an underlying profit of £267 million for the last quarter, a fall of 63% for the same period a year earlier. The bank, spearheaded by Stephen Hester, is progressing through a five-year plan to turnaround the bank from its previous debt induced woes. RBS announced that it is to further downsize its investment banking operations and cut more jobs in an effort to shift more efforts towards its retail and commercial banking operations.

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