European indices start the week positively banks lead

European indices started the week in positive territory with the FTSE 100, DAX and CAC all posting gains of around 0.2%.

Banks have provided the heavyweight charge behind this morning’s stock indices gains, with the sector in London gaining 1% and shares of Barclays and HSBC leading the way.

Shares in Burberry Group, the high end fashion retailer, have topped the FTSE 100 leader board today after the firm announced a joint venture with Saudi based retailer Fawaz Abdulaziz Alhokair Co to market Burberry’s goods in the region. Shareholders have clearly reacted well to the new horizons the venture may open up in the region, pushing Burberry’s shares higher by 2%.

The speed of the bounce higher last week has done much to reaffirm the feeling that investors remain confident that equity markets still have upside to come. This point is emphasised by the fact that the Volatility Index, the market’s main gauge of trader fear or pessimism, fell by some 26% last week alone.
This week we focus on two aspects, the potential for investors to lock in their gains and a heavy calendar of economic data due out, culminating in non-farm payrolls on Friday.

The faster equity markets rise, the more enticing it is for investors to lock in their gains, particularly with a number of issues such as impending interest rate hikes, high oil prices and sovereign debt remaining in the foreground. It is going to be important that should any bouts of profit taking make their way into the markets that we see investors use price dips as buying opportunities. This will help to reaffirm the early March falls as nothing more than a price correction. That said, it could be healthy for prices to begin to consolidate around these levels to reaffirm buyer support before a push higher in prices.

Before March’s falls, the FTSE 100 had been locked in a 250-point trading range between 5850 and 6100. It will be important to see the sharp recovery in prices help the FTSE 100 push on past the 6100 upper limit to the years trading range, otherwise the status quo of the range may be endured even longer.
In terms of economic data, there is enough to trigger some volatility this week and so traders need to be on their guard.

Today we have personal income and spending data before pending homes sales are released, both out of the US. Tuesday sees the final reading of Q4 UK GDP, whilst the afternoon sees US consumer sentiment. On Wednesday we have EU economic sentiment and ADP employment change whilst Thursday sees US factory orders and Chicago PMI. And on Friday we finish with the usual first Friday of each month jobs reports with keen eyes towards both non-farm and private payrolls, along with the US unemployment rate. Early indications are that non-farm payrolls will grow around the 200,000 mark from February’s 192,000. This is likely to have a large impact in the near term not just on stocks but also the dollar.