FTSE charges higher by 1 5 on euro and US jobs optimism

The FTSE 100 rallied another 1.5% on Friday, putting the UK Index on track for the best weeks trade since late December 2008 as traders bought into the market ahead of the latest US jobs data.

There is some fresh investor optimism on the back of Sarkozy’s inspiring speech yesterday to bring about a new treaty based on budget discipline and Mario Draghi’s comments of potentially greater ECB involvement should greater fiscal union be achieved. Investors are starting to connect the dots between the two statements yesterday and it is this, aligned with fresh optimism that we could see a strong US payroll numbers this afternoon is lifting European Indices over 1.5% in early trade.

Most of the buying we have seen today has taken place in the heavyweight mining, banking and insurance sectors. All three of these sectors have gained between 2% and 3% in trade already with stocks such as Barclays and HSBC the two key heavyweights pulling the FTSE 100 higher.

The moves seen of late from both Nicolas Sarkozy and Angela Merkel to bring about a greater degree of fiscal union is positive, though clearly the idea of a euro bond still remains far from reality given that there was another example of Merkel’s opposition to such an idea today when she said “discussion on euro bonds is pointless.

The hints of Mario Draghi, the ECB President, yesterday that he could be prepared to allow a greater involvement in the crisis of Europe’s central bank is being widely interpreted, somewhat optimistically, that the ECB could start to intervene in the bond markets much more aggressively should greater fiscal union be achieved through treaty changes spearheaded by the Merkozy duo.

That said, this is not the first time the markets have rallied on fresh optimism ahead of a crucial EU Summit only for disappointment to send stock prices tumbling thereafter and so caution is warranted ahead of next week’s summit and indeed any progress made over the weekend in talks. The sceptic in me warns that the scenario we are seeing in financial markets reaps of a case of history repeating. Despite this fear, we have seen some rally in UK stocks this week and one sincerely hopes European leaders prove that it is justified.

ICAP shares were the best gainer on the day in London trade after press speculation that the interdealer broker had benefitted from the acquisition of several key staff from former failed rival MF Global. Shares traded higher by over 4%.

On the downside was Admiral Group, whose shares fell over 1% after the several brokers issued somewhat negative guidance on the stock. Investec cut their target price on the firms shares price to 570p from 843p, a large 30% revision in target, whilst RBC also started coverage on the stock with an underperform rating.