FTSE posts gains in choppy trading session

European Indices swung between small losses and gains on Monday, as equities pared strong gains in the morning session as traders became anxious ahead of the all important Fed meeting that starts tomorrow. The FTSE 100 however, boosted by heavyweight mining stocks, outperformed its European peers to post gains of around 0.25%.

We are likely to see traders juxtaposed between bouts of profit taking and speculative buying until we see exactly how the Fed plans to rejuvenate the struggling US economy. This means that the markets could remain particularly choppy going into Wednesday when the FOMC meeting concludes.

Today what we had was some very bullish Chinese manufacturing data that teased those investors who wanted to sit on the sidelines to come into the market. However, as Indices progressed towards gains of around 1%, investors cashed in their gains early, refusing to get too drawn into a market that has rallied 13% over the last two months on optimism that the Fed will announce a second round of quantitative easing.

Investors could be left rather disappointed if the Fed adopt a rather conservative stance in terms of the scale of asset purchases on Wednesday night and so fearing this, most traders are going into defensive mode just in case exactly that happens.

The main gainers today helping to push Indices higher have been the miners and much of this has been a knee jerk reaction to the positive data out of China. Bullish Chinese manufacturing data boosts optimism that metal demand is unlikely to wear down anytime soon and this has been a positive catalyst for the miners today. We have seen Xstrata, Kazakhmys and Antofagasta all gain well today on the back of the data from China.

The banks have also been the subject of some speculative bouts of buying from those investors betting that they could report strong figures. Lloyds Banking Group announces a trading update tomorrow and its shares have gained 1% today on traders betting on strong earnings. Royal Bank of Scotland, who announce on Friday has also seen strong buyer demand today, pushing its shares higher by 2%.