Markets recover as Investors eye up Central Bank decisions later in the week

European markets started the session higher following a bailout agreement for Cyprus and  strong performances overnight both on Wall Street and in Asia after assurances of accommodative monetary policy from the Federal Reserve boosted risk appetite.

Liquidity provision by the central banks across the globe has driven the rise in stock markets this year despite the sluggish recovery in the world economy. Investors will be watching very closely this week as they search for reassurance that central bank support will continue and not be prematurely withdrawn. Comments last night by a US Federal Reserve official backing aggressive monetary stimulus has helped to keep hope in place for the US. Decisions by the Bank of Japan, the Bank of England and the European Central Bank due later in the week are expected to keep the current loose policies running or indeed add extra stimulus.

Of particular note, neither the inconclusive elections in Italy nor the Government spending cuts in Washington have prompted a sustained sell off in equity markets with pull backs being used as buying opportunities. However, concern over the withdrawal of stimulus is a key theme which could direct the market, especially in the short term.

By mid morning the FTSE was trading up 0.7%, whilst the DAX and CAC had gained 1.7% and 1.5% respectively.

Elsewhere in Europe, finance ministers agreed to a bailout for Cyprus by the end of March, although details of the 17 billion Euro package are yet to be arranged. Retail sales for the Eurozone also gave investors a reason to be cheerful showing a 1.2% improvement, above market expectation.

Additionally, Eurozone PMI data also came in better than forecast at 47.9 against an expected 47.3, however still below the January figure of 48.6. Activity remains weak outside of Germany and this may put pressure on the ECB to implement further support policies at the meeting on Thursday.

Here in the UK, Serco Group has topped the FTSE 100 leader board, up over 10% after reporting operating profits for 2012 of £287 million, an increase of over 8%.

Standard Chartered also reported today, posting record profits of $6.88 billion pre tax, but still below analysts’ expectations of $7 billion. The group also reported an impairment loss and credit risk provision of $1.2 billion, which is unusual for this bank which has enjoyed a decade of growth and few problems. The share price was up 2.7% by mid morning at 1828.

Looking to the afternoon a shortage of economic data here in Europe means investors will look towards US Non manufacturing composite due at 3pm GMT.