FTSE recovers Tuesday’s losses to rally 0.5% as banks gain again

<p>The FTSE 100 traded back into positive territory on Wednesday, immediately recovering Tuesday’s losses as heavyweight banking stocks continued to support the UK Index. From a sector […]</p>

The FTSE 100 traded back into positive territory on Wednesday, immediately recovering Tuesday’s losses as heavyweight banking stocks continued to support the UK Index.

From a sector perspective, it is the banks that are proving the main support to the FTSE 100 yet again today, with strong performances also from insurers and real estate stocks, the latter on the back of upgrades from HSBC on Real Estate Investment Trusts, helping the UK Index to rally higher 0.5%. The FTSE 100 is now primed for another attack at resistance around the 6091 level and investors will need to see a close above the 6117 level to be convinced that the bullish momentum can continue.

We have continued to see buyer interest in the key banking stocks with the traders still bulled by Barclays earnings yesterday. Royal Bank of Scotland and Lloyds Banking Group report their respective earnings next week and so much of the buying we have seen has been about traders speculating that they could report a similarly good tone of voice to that of Barclays.

Mine’s a Heineken
Beverage firms across Europe have been lifted by earnings from brewer Heineken, who beat market expectations to report a 37% jump in net profits to €1.48bn. The world’s third largest brewer’s cost cutting measures appear to have gained traction and offset lower beer sales for the period. The brewer also expects to raise prices to compensate for higher input costs, posing another warning sign for future inflation.

UK Inflation Report + Claimant Count
The number of Britons claiming unemployment benefit rose last month, taking the market by a bit of a surprise. The jobs data reminds traders of the fragility of the UK economic recovery and poses another stark warning to the coalition government as they attempt to reign in public spending with a series of severe budget cuts that have yet to take affect to the bottom line. The pound sterling weakened as a result of the jobs data.

Traders will now switch their attention to the quarterly inflation report from the Bank of England to help them to gauge when interest rate hikes are likely to come. The market is steadily growing in expectations that May will see a 25 basis point hike in interest rates, a sentiment seemingly strengthened by the tone of voice used by Mervyn King in his open letter to the Chancellor yesterday.

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