Traders buy stocks on expected ‘yes’ vote in Greece
City Index June 29, 2011 2:56 PM
<p>Stock Indices rallied for a third straight session on Wednesday as Greece prepared to vote on new austerity measures, with investors confident that the package […]</p>
Stock Indices rallied for a third straight session on Wednesday as Greece prepared to vote on new austerity measures, with investors confident that the package would pass through parliament. The FTSE100, DAX and CAC all traded higher by 1%, led chiefly by gains in heavyweight mining and energy firms, insinuating that traders are happy to delve into risky asset classes.
This week has already seen the FTSE 100 enjoy a strong bounce, with the UK Index rallying over 2% in just three sessions. The miners have been the energy behind these gains this week, with the sector rallying over 4% from Friday’s close, whilst the energy and banking sectors have closely followed with gains of 3% respectively.
We need to see the FTSE 100 consolidate back above the 5860 level in the near term to convince that a bullish bias has been restored. This weeks gains, whilst impressive, may ultimately come to nothing unless the FTSE 100 can break through the immediate resistance barriers the UK Index faces.
The gains we have seen have been borne purely out of market optimism that today’s vote on Greece’s austerity package will pass through parliament, paving the way for the vital loans the country needs from the EU and IMF to keep the country from the brink of bankruptcy.
Were we to see a no vote and parliament reject the package, it would be quite a shock to the markets and we could see a high degree of volatility. However, with opposition figures seemingly changing hearts and backing the package in the last few days, a ‘yes’ vote is being priced in by the markets.
There is no end to the crisis however with a yes vote. We still need to see the implementation of the package pass through tomorrow and Greece receive the next tranche of loans, though both factors would also be expected to happen as mere formalities of today’s proceedings.
The markets has seen a strong bout of gains this week but there remains some severe headwinds facing the global economy such as sovereign debt spreading within the euro zone, the potential for a slowing of Chinese growth and the end of QE2 in the US. To that end, we should be mindful of the potential for sharp bouts of profit taking.
Senior shares lifted on earnings
Shares in manufacturer Senior rallied 8% to be the best mid-cap gainer in today’s London markets after raising its full year profit outlook on strong demand and a recovery in its truck markets. The news helped to lift its peers higher also, with FTSE 100 firm IMI also rallying near 3% on the day.