Greater London, England -- (SBWire) -- 02/11/2011 -- In his daily EU market update for 7th February, Joshua Raymond of spread betting provider City Index (http://www.cityindex.co.uk/) takes a look at why investors are starting this week on the front foot.
“Investors have started the week on the front foot, hunting commodity related equities such as miners and energy firms, helping to charge European indices higher by 0.6%.
It’s been a very positive start to the week with buyer demand spread evenly across the board helping each key equity sector to post early gains. Naturally with the price of copper extending gains yet again, this has attracted buyers in the heavyweight mining sector, which has gained over 1% already today. We have also seen similar strong buyer demand within the energy sector and it is these two strongly weighted sectors that are responsible for much of the early index charge.
Lack of economic data frees traders’ hands
Apart from German Manufacturing Orders out at 11am GMT, there is a distinct lack of economic data throughout the early part of the week, with the first significant data piece being the Bank of England rate announcement out on Thursday. This is likely to free up traders hands somewhat and we have already started to see elements of this with today’s buyer action. The FTSE 100 has now rallied for four out of the last five trading days, but traders are likely to want to see the UK Index break above previous highs of 6090 to affirm that the FTSE continued to trade with a bullish bias.
In terms of the individual stock movers, we have seen some early buyers in gold miner Randgold Resources, which announced a 25% increase in gold sales and an 18% increase in dividend. The positive results have encouraged shareholders to add to positions, triggering a 3% rise in its share price this morning.
On the downside, shares in Rolls Royce Group fell over 0.5% whilst Hiscox, the insurer, also suffered losses of 2% after UBS downgraded its recommendation to ‘neutral’, from a previous ‘buy’ stance citing a ‘full’ valuation compared to its sector peers.
Traders buy sterling on rate expectations
The pound sterling has attracted buyers on expectations that UK interest rates will go up earlier this year than expected. Recent UK data has pointed to increased inflationary pressures and whilst fourth quarter UK GDP was shockingly bad, many of today’s sterling buyers are attributing the contraction of 0.5% to the poor weather rather than fundamental weakness in economic growth.
The rate decision on Thursday, whilst unlikely to herald a change in rates, will be very interesting to watch, particularly if rate hike enthusiast Andrew Sentance encourages more committee members to join his call, having gained Martin Weale in the last vote.”
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Spread Betting News: European Indices Start the Week Higher on Commodity Gains – City Index