Tentative bounce for EU stocks ahead of Italian austerity vote

Stocks across Europe saw a tentative bounce on Friday, ahead of an important austerity vote in the Italian Senate that should pave the way for Silvio Berlusconi to step down from power.

By mid morning, the FTSE 100 was trading higher by 0.2% whilst the DAX and CAC also saw gains of 0.4%, led chiefly by gains in oil and pharmaceutical firms.

There remains a wandering eye towards the vote in the Italian senate on the crucial EU approved austerity plans. Whilst the vote is expected to pass without difficulty, investors are mindful of any shocks and this is creating a market devoid of much activity today.

Should the vote pass as expected, the market’s next focus on Italy will be on how quickly the country can move to shore up its political house, and the speed at which Mr Berlusconi can be replaced by a government of unity is likely to be crucial in this phase.

The fact that Italian bond yields have continued to recede has helped to ease investor concerns over an immediate escalation in the Italian debt crisis, though there remain significant fears that the crisis could escalate imminently.

It could be folly to read into today’s gains as investor sentiment changing to the positive, with still so much at risk in the eurozone and so as such, gains remain fragile and open to reversal depending on the headlines out of Rome and broader Europe.

In terms of individual stock movers, Schroders is the top gainer on the FTSE 100, with its shares rising 4.4% after Deutsche Bank upgraded their view on the stock to a ‘buy’ from an original ‘hold’ recommendation. The upgrade was dictated by the company outperforming original expectations with their third quarter earnings and Deutsche now says that negative news has been already priced into the bank’s share price, which has fallen below their original target of 1350p.

Shares of International Consolidated Airlines Group also rose strongly on the back of a positive trading update to the market this morning. Shares rose 4% after the group said that cost savings from the merger between British Airways and Iberia would be higher than original expectations at €450 million, whilst it also set a new operating profit target for the merger of €1.5 billion in 2015, boosting shareholder optimism.

The share price of Premier Foods hit a new one-month high today, rallying 14% in early trade as the share price recovery continues to gain some tentative momentum.

On the downside were shares of Standard Chartered Bank, falling 1% whilst key miners also kept a leash on the FTSE 100′s gains. Fresnillo, Rio Tinto and Xstrata all weighed on the FTSE’s charge today, with their share prices falling around 1% despite copper prices gaining, which shows that whilst today’s gains are positive, investor appetite for risk remains tentative at best.