Gains of 1.5% for EU Indices as China data supports
City Index August 23, 2011 4:39 PM
<p>Stocks across Europe saw gains for a second consecutive session after PMI data from China increased marginally, countering earlier fears of a continued slowdown. This […]</p>
Stocks across Europe saw gains for a second consecutive session after PMI data from China increased marginally, countering earlier fears of a continued slowdown. This helped the FTSE 100 to rise 1.4%, with similar gains seen for the DAX and CAC.
However, a sharper than expected fall in German business confidence knocked the wind out of the earlier Index advance a bit by mid morning, with the ZEW economic sentiment index falling 37.6 when a fall of 25 was expected.
The Chinese data, which showed that Flash PMI rose from 49.3 to 49.8, was enough to encourage further demand for the key mining companies, on expectations of continued strong metal demand from the world’s fastest emerging economy. This helped to support stocks such as ENRC, Xstrata and Glencore to rally over 3%, tracking the broader FTSE 350 mining sector which rose over 2.5% on the day.
The FTSE saw higher highs and higher lows, which is a good sign for the near term outlook for UK stocks but must start to build some upward momentum and hold onto its gains which, in the context of Jackson Hole and UK and US GDP to come on Friday, remains open to reversal. If the UK index can come through resistance at 5209 and 5283, there is every chance that the FTSE could revisit the 5400 level albeit with continued wide price swings.
One of the bright spots to today’s trading session has been strength in banking stocks, with gains seen in Lloyds Banking Group, RBS and Barclays. The FTSE 350 banking sector rose over 2% in the first hour of trading as bargain hunters made their move with banking stocks being one of the worst hit areas of Augusts’ selling pressure, whilst a positive note on the sector from Goldman Sachs who said that “we see value in UK banks overall” helped to support prices.
Foster’s tries to fend off SABMiller with $500m shareholder return
Both Fosters and SABMiller’s share prices saw gains of 1% on Tuesday after the Australian brewer attempted to win shareholder support in their rejection of SABMillers’ $10bn offer through returning $500m to shareholders through a share buyback scheme or capital reduction. Existing major shareholders have shown displease with Foster’s unwillingness to discuss the proposal with SABMiller and the move made by the owner of Fosters and Victoria Bitter is being seen as having two tactics; appease shareholders and potentially attract a higher offer from SABMiller. The move came in the context of an expected slump in profits and margins as competition increased at its home markets. There is a chance that SABMiller could return with a higher offer though with no visible rival in sight, any increase on their $4.90 per share bid is unlikely to be excessive.
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