European stocks rise on Greek bailout deal hopes whilst UK retail sales surprise

European stock indices rose on Friday as investor appetite for risk increased on optimism that finally a Greek bailout deal should emerge, after eurozone officials confirmed that the deal should be approved by Monday.

A surprising growth in UK retail sales in January, when a decline was expected, also helped to improve near term investor sentiment in the markets today, lifting UK retail stocks.

By mid morning the FTSE 100 had rallied 23 points or 0.4%, lagging behind its stronger European peer indices however, with the DAX gaining 0.9% and the CAC rallying 1.1%.

Greece edging closer to Monday deal 
Clearly the fact that finally the Greek bailout drama is seemingly coming to an end is helping to free the hands of investors somewhat. Earlier in the week investors did not know what to believe given the direct contradictions of rhetoric emanating out of Europe. However, with eurozone officials now confirming that unless something unforeseen emerges over the next 48 hours, a bailout deal should be agreed for Greece by Monday, the confidence on all party sides is helping to translate well into risk appetite in European stock markets today.

That said, there have been countless times whereby a deal seemed locked in, only for one or more parties to deviate away from the table and so investors are on guard for any surprises. As a result, much of the risk appetite we are seeing are on very short term contract positions with close stop losses, giving investors room to change positions should the situation change.

This risk appetite is helping to push up the prices of key mining stocks in early trade, and this is where much of the energy of the FTSE’s charge has been dictated from. The FTSE 350 mining sector gained over 1%, whilst similar gains were seen in key banking stocks also, with shares of Royal bank of Scotland, Lloyds Banking Group and Barclays also rallying between 1% and 2%.

UK retail sales surprisingly grow in January 
UK retail stocks also gained strongly in trading after data showed that UK retail sales surprisingly grew last month when a decline in sales was expected. Sales grew 0.9% against a consensus of minus 0.4%, and this was a real surprise.

Whilst it may be somewhat folly to get too enthralled in today’s surprising UK retail sales growth given the consumer headwinds facing UK high streets, the data has given an inevitable boost to UK retail stocks today, with the FTSE 350 retail sector rallying over 1% on the back of the data.

January’s data can typically deviate from fundamental strength given the wide scope of offers retail firms are promoting to increase footfall to their stores within the ‘January Sales’ period. This may exacerbate these figures somewhat and we will require more evidence of high street strength before becoming convinced of its positive impact on UK growth. Nevertheless, this is a very welcome surprise.