FTSE sees gains of 1% on commodity strength and better than expected ADP report

<p>Stock indices across Europe saw tentative gains on Wednesday, with stocks bouncing back somewhat from two previous days of sharp losses after Greece announced that […]</p>

Stock indices across Europe saw tentative gains on Wednesday, with stocks bouncing back somewhat from two previous days of sharp losses after Greece announced that it would put its latest bailout deal up to a public referendum.

The FTSE 100 closed higher by 62 points at 5484 whilst the DAX and CAC saw stronger gains of 2.2% and 1.4%, having both seen sharp losses of more than 5% on Tuesday.

Most of the gains were driven by a rise in the price of copper, which rallied 2% and helped to encourage some bargain hunting in the heavyweight mining companies which had been aggressively sold off on Tuesday.

There were a multitude of headlines for investors to keep an eye on today and so this kept trading choppy throughout much of the morning session. However, it was the better-than-expected US ADP employment data out in the early part of the afternoon that sparked an afternoon rally into the close. The US ADP employment report saw a growth of 110,000 private jobs, which was larger than the 101,000 expected by most investors and helps to raise some optimism that Friday’s non-farm payrolls may also outperform.

The FTSE 100 rallied much of its 1% directly off the back of the stronger than expected jobs report, whilst sentiment was also boosted by faint hopes that perhaps Ben Bernanke and the FOMC may announce additional easing measures in the late afternoon’s FOMC meeting and subsequent press conference with the Fed Chairman.

Traders had their eyes firmly fixed on developments regarding Greece and the week’s G20 meeting in Cannes too. Nicolas Sarkozy, Angela Merkel and Christine Lagarde, the IMF head, will chair a meeting with Greek PM George Papandreou in Cannes this evening in preparation for the start of tomorrow’s G20 Summit, where they are expected to tell the Greek PM that he must stick to the agreements made last week in Brussels, agreements which currently look fragile considering they now require public ratification. Investors will pay strict attention to any statement made as a result of the meeting, though considering that Mr Papandreou won cabinet support in a long running meeting last night, it is hard to see Greece backing down from its referendum pledge now unless he loses a vote of confidence on Friday.

There have also been several companies reporting to the market today including Next, Randgold Resources and Standard Chartered.

Next shares rallied near the top of the FTSE 100 winner list after the retailer reported a growth in sales of 3.3%, which was higher than the market had expected as sales via its online directory helped to weigh a slowdown on the high street. The retailer also maintained full-year sales and profit forecasts, helping to support near term sentiment in the firm’s share price, which rallied 6.5% on the day.

Randgold shares also saw healthy gains of 7% after the gold miner announced a jump in profits to £122.9 million from £28.2 million a year ago, helped by a large jump in gold production and prices.

Standard Chartered, in a statement to the market, also confirmed that profit growth was expected to be in the double digit percentages, whilst it was on track for a ninth consecutive month of record earnings. Shares however lost 1% in trading.

Lloyds Banking Group shares were the top loser on the day, falling 3% after the surprising announcement that newly appointed CEO Antonio Horta-Osorio will take a leave of absence until the end of the year on medical advice due to stress. The announcement was a bit of a shock and completely unexpected. What’s more, the CEO’s absence comes at a potentially crucial time for the bank as it weighs up selling over 600 branches and deals with the complexities of a European banking crisis in the midst of the sovereign debt fallout.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.