Stocks recover from early falls on Euro Bond comments

Comments from European Commission President Jose Manual Barroso regarding the potential introduction of euro bonds was enough to lift stocks from more early woes to help push European Indices into positive territory on Wednesday but sentiment remained fragile with gains open to fluctuations.

By 11am the FTSE 100 was trading higher by 0.9%, whilst the DAX andCAC both rose over 1% with most Indices benefitting from some bouts of bargain hunting, particularly in the resource sector.

Euro Bonds?

The prospect of a Euro Bond would be something the market would want to see and could go some way to eradicating the investor unease surrounding the Euro Zone sovereign debt. Jose Manual Barroso told the European Parliament today that the EU Commission would soon present options for the introduction of euro area bonds and it appears that these words have given investors the fillip to pick up some stocks in the short term after a weaker opening.

That said, Euro Bonds is not going to happen overnight. Barroso himself maintains that to do so would require a treaty change, whilst the idea of a euro bond is impossible without a significant loss of fiscal sovereignty by member states, which might not be possible when there is already such disunity amongst Europe.

French bank ratings cut no surprise

The downgrades in credit ratings for French banks Societe Generale and Credit Agricole by Moody’s today was no surprise at all and had been long rumoured in the market. One upside to read into the decision was the confidence from Moody’s that French banks remain well capitalised and the fact that many had feared as much as a cut of two notches in rating for Societe Generale, than the one notch that was actually cut. All three key French banks lost around 2% by mid morning, and prices remain highly volatile as traders react to every ounce of news and sentiment, almost on an hourly basis.

Banks and Resource stocks lead FTSE higher

All three key UK stock sector, the miners, banks and oil firms saw gains of over 1% on Wednesday, and this is where much of today’s FTSEgains are being energized from. UK banks, RBS and Lloyds saw gains of 3% with sentiment boosted by news that Moody’s sees no impact on UK bank ratings from the ICB report on bank restructuring.

UK claimant counts rise 20,300

UK unemployment claims rose less than the market had expected last month of 20,300, slowing from the previous month’s rise of 33,700 when a small rise to 35,000 had been expected. The UK unemployment rate remained steady at 7.9%, as expected.

One of the negatives to read into the numbers however was the fact that the more broader ILO figure, which tracks those looking for jobs, posted an increase of those unemployed of 80,000, the biggest quarterly increase in two years, whilst 69,000 jobs were also lost in the previous quarter.

Today’s jobs numbers reminds that in the age of austerity, the UK labour market is set to deteriorate further with public job losses weighing and this is likely to impact consumer spending habits in the medium term.