FTSE closes marginally unchanged after earlier fall of 1

The FTSE 100 endured a bit of a rollercoaster trading session with losses of 1% recovered in afternoon trade to see the UK index close at 5517, down just 1 point on the day.

Banking stocks remained the key drag on the FTSE 100, with the sector losing 1% on the day but a rally in insurance firms and a retracement of losses in mining firms helped to spearhead an afternoon recovery for the benchmark UK stock index.

Also helping to lead the charge were tobacco and pharmaceutical firms, two sectors typically viewed as defensive investments, and so we can sum up the afternoon rally as not evidence of a return to broad risk appetite.

Moves in bond markets continue to put question marks over the strength of European stock indices, and despite the fact that the FTSE 100 closed flat, the DAX and CAC both closed lower in weaker trade, typifying the concerns that remain in broader European markets over the state of Italian and now Spanish debt markets.

Italian 10 year bond yields returned to trade back above the psychologically important 7% level today, raising fears that investors remain immensely sceptical over the country’s ability to meet its debt obligations in the midst of continuing political instability, despite the arrival of Mario Monti.

It is increasingly becoming clear that investors need to see evidence of Mario Monti living up to his ‘Super Mario’ nickname sooner rather than later if the country’s debt market turbulence is to cool soon and reassure investors.

Spanish bond yields also rose on the day, with 10 year bond yields rising to 6.36%, a rise of more than 0.23% on the day, keeping widespread contagion fears of debt firmly at the forefront of investors’ minds.

UK inflation dips to 5%
UK inflation eased slightly more than expected last month to 5% from 5.2% in September, helping to ease pressure on the Bank of England to rein in inflation and help cement the view that inflation may have peaked. Whilst Mervyn King may well view today’s inflation figures as a welcome justification for the Central Bank’s stance in reigniting the quantitative easing flames, we are likely to learn much more about the likely path of inflation with the release of the Quarterly Inflation Report tomorrow.

Burberry shares lose 5% after update
Shares in luxury goods maker Burberry lost 5% after the firm reported figures which fell broadly in line with market expectations. Burberry posted a profit before tax and one-off items of £162 million, a rise of 26%. The goods maker also maintained its full-year forecasts but shares dropped as investors decided to lock in their profits after a strong run that saw the firm’s shares rally 35% from the lows of October.

EasyJet shares dip 2% but pay dividend
Shares in budget carrier easyJet dipped 2% in trading after the airline reported a 31.5% rise in full-year profit and announced its first ever dividend. The firm revealed a special dividend of 34.9p, which comes on top of an ordinary dividend of 10.5p, resulting in a payout to shareholders of £195 million. shares had been trading near the top of a six-month trading range as the dividend was no real surprise and today’s fall in shares is not being seen as a dramatic bearish reversal just yet considering the robustness of today’s figures.