Greater London, England -- (SBWIRE) -- 10/05/2010 -- Joshua Raymond, Market Strategist, City Index (http://www.cityindex.co.uk) commented:

“European Indices charged higher today, recovering from yesterday’s late falls to start the new month and quarter on the front foot.

Most of the gains today have been driven higher by strength in the commodities sector, which has benefitted from resilient Chinese manufacturing data. Chinese PMI for September rose to 53.8, much higher than the market had expected and this boosts confidence that a slowdown of resource demand from the rapidly developing region may not come anytime soon. This has helped to trigger higher prices for commodities such as Copper and Crude Oil, which in turn have lifted the heavyweight energy and mining sectors in Europe.

The energy sector is higher by 2% in trading so far with most of those gains emanating from BG Group and BP. We can pin point most of the FTSE’s strong pricing action today to the healthy performance in BG and BP's respective share prices.

We have also seen bank shares recover having suffered four straight days of weakness. The sector has lost 4% in the last four days and so this has attracted some buying this morning with traders trying to pick up some of the banks at weaker prices.

Traders await US data
Today’s gains have been limited to as much as 1% however with traders looking ahead to some important US data. This afternoon we will see US personal income and spending data, followed by consumer confidence and ISM manufacturing, all of which will play a strong hand in how Europe closes today.

One of the key influences behind September’s gains has been traders betting on the Fed injecting extra stimulus into the markets. Yesterdays better than expected US GDP and Chicago PMI data may have posed a threat to the need for extra stimulus. Therefore, whilst better than expected data could knee jerk the markets higher, in the near term it could weaken the immediate case for more stimulus which in turn could trigger investors into profit taking at these levels, at least until the third quarter earnings season kicks in.”

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