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Europe mixed miners lag as defensive sectors move higher

Article By: ,  Financial Analyst
May 3, 2011 1:25 PM

European indices traded mixed on Tuesday as investors returned to a normal schedule of trading after consecutive long bank holiday weekends.

The FTSE 100 traded into positive territory by 0.25%, having played a bit of a catch up on the German DAX and French CAC indices, both of which traded negatively by 0.3% after seeing impressive starts to yesterday’s session reverse strongly.
The Bin Laden news gave equity markets a big boost early yesterday but this was merely a knee jerk euphoria induced reaction. That buying has quickly foundered, testified by the sharp reversals in both German and French markets late yesterday. The UK is playing a bit of catch up to the rest of Europe in that sense, having been closed for Monday’s bank holiday, and today’s buying of defensive shares is an indication that buyers remain interested in today’s markets but at a lower appetite for risk.

We have the Bank of England rate decision due out on Thursday where no change is expected in rates, and we also have the all-important US jobs data to finish the week on Friday. So it would be no surprise to see investors take some profits off the table and return slowly to the markets this week.
Data from Hometrack showed that English and Welsh house prices fell by the fastest annual pace in 18 months and are likely to slip further. This will also put pressure on the Bank of England not to hike interest rates too soon. A rate hike on Thursday would be a real surprise to the markets given the rhetoric from the UK Central Bank’s Governor Mervyn King, whilst a hike in May is now also seen as near unfathomable.
Leading the charge in the London session was hedge fund Man Group, whose shares climbed over 3% after the firm launched a new $1.5 billion Nomura Global Trend fund. The success of interest in the fund is said to have been extremely encouraging and one which CEO Peter Clarke calls an ‘outstanding success’.

It is going to be crucial for the FTSE 100 to break through its 2011 high of 6105 and consolidate above this level. Failure to do so would re-confirm the year’s largely 250-point trading range once more and could open the index to profit-taking where buyers may wait for a fall in prices.

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