FTSE loses 0.5% as political situation intensifies Euro crisis
City Index May 8, 2012 3:10 PM
<p>The FTSE 100 lost 0.5% as traders in London returned to their desks and sold out of risky asset classes such as the miners and […]</p>
The FTSE 100 lost 0.5% as traders in London returned to their desks and sold out of risky asset classes such as the miners and banks, over the weekends progression that saw political deadlock in Athens threaten the country’s bailout and Hollande swept to victory in France, a victory itself that investors are concerned could threaten the countries good relationship with Germany.
It was a roller coaster equity trading session in Europe yesterday with French stocks in particular swinging wildly from losses of 1.8% to close higher by 1.7%. This morning’s trade has seen losses return for European stocks and UK trade, which is catching up after the Bank holiday saw trading closed yesterday, has followed suit to the downside.
The gains posted yesterday and the sharp turnaround in trading is not something that should make investors feel significantly confident that investor sentiment is unperturbed by the Political drama in Athens and the arrival of a new French President. Such violent swings in European stocks yesterday shows indecision by investors, who are unsure of how to position themselves in the longer term and as such, trading remains with a short term edge and open to more bouts of volatility.
The situation in Greece is highly uncertain. Whilst the New Democracy leader Samaras failed to secure a collation government of ‘national salvation’ over the last few days, it remains uncertain that the Left Coalition party will be able to do so either, and this would leave the country in limbo and facing new elections. If the Left Coalition does get into power, its likely that, as per their election mandate, they will reject the terms of the bailout, and this could significantly threaten to fiscally destabilise the country yet again. In essence, there remains a huge amount of uncertainty in Athens and this is playing a role in hampering any buying activity in broader European stock markets from being just tentative and bargain hunting at present.
Economic data continues to come in thick and fast after last weeks US jobs disappointment. At 11am GMT we will see the latest release of German Industrial Output, which is expected to grow 0.8% from a previous fall of -1.3%. The release comes hot on the heels of German manufacturing orders, which beat expectations yesterday to grow at 2.2% on a monthly basis, against expectations of a drop of -0.3%. There is no significant UK economic data due for release today but eyes are turning to later in the week when we see the Bank of England decision on rates and QE on Thursday.
Tullow Oil was the top gainer in trading today, with shareholders gaining in enthusiasm after the explorer found more oil in it Kenya well, triggering a raft of broker upgrades. Tullow Oil shares rose 3.8% as a result, closely followed by Aviva shares, after a successful shareholder revolt saw its CEO Andrew Moss resign this morning with immediate effect. Aviva shares rallied 3.3% in early trade as a result.
HSBC shares gave heavyweight support to the UK Index however after the bank reported a 25% jump in underlying pretax profits for the first quarter to $6.8bn, which significantly surpassed most expectations of $5.8bn to $6bn. HSBC shares rose 0.9%.
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