Markets fly on FED stimulus and corporate guidance
City Index November 4, 2010 8:16 PM
<p>Heavy weight banks and miners drove the FTSE to two year highs this morning, as investors cheered the Feds move to pump $600bn into the […]</p>
Heavy weight banks and miners drove the FTSE to two year highs this morning, as investors cheered the Feds move to pump $600bn into the staggering US economy. The UK market was up over hundred points an hour into the session breaching 5850 and reaching levels not seen since June 2008.
As if the Fed move wasn’t enough to drive sentiment, solid corporate earnings from heavyweights Unilever and Man Group set the tone for a positive morning. Unilever shares rallied 3% after announcing a solid trading update for the 3rd quarter hitting the top end of analyst expectations. Fund Managers Man Group also impressed the market, trading 8% better after seeing profits drop to $227 in the first half of the year, better than had been expected.
Man Group has been much maligned of late, but the first half numbers suggest that this may be unwarranted and the CEO signalled the company’s strength by dismissing takeover rumours.
Corporate updates in Europe also provided cheer, as BNP Paribas surged 3.5%after reporting a 46% increase in third quarter profit. In Switzerland, insure Swiss RE surged 6% on news that the firm had doubled third quarter profit.
Investors have been on tenterhooks for days awaiting the FED announcement and initial reaction last night seemed muted as the Dow Jones trended and currencies fluctuated in tight ranges.
But a more positive mood began to emerge overnight as Asian markets rallied hard. Markets were called up 0.5% in the early session this morning, as higher commodity prices and a weaker dollar were seen as catalyst for miners to drive European indexes higher.
Momentum has snowballed and investors have been adding to positions rather than taking profit. It seems that in the very short term, the market has received QE2 well, but with Jobless data round the corner and the health of the recovery now under even closer scrutiny, any real vindication of the policy could take months to emerge.
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.