FTSE starts week with a 1 gain tracking global stock indices higher

The FTSE 100 started the shortened trading week higher by 1%, led by gains in the heavyweight oil and banking sector on renewed hopes for Greece. Sentiment as a whole tracked the positive session in Asian trading this morning, which saw the Nikkei enjoy is best trading day since the end of March.

Germany concessions appear to pave the way for a second Greek bailout
The speculation in the press that Germany was preparing to make concessions to help facilitate a new aid package to Greece has also helped to brighten stock prospects today, at least in the near term. Reports that Germany was preparing to drop its calls for an early rescheduling of Greek bonds is seen as helping to move a new aid package closer to reality, a package which Jean-Claude Trichet is “quite optimistic” about reaching.

In truth, sentiment over Greece has been swinging between optimistic and negative like a see saw for much of the last few months. Whist it appears that a resolution over a new aid package is closer now more than ever, what remains clouded is the reaction of ratings agencies and whether the conditions for the package will be met with acceptance on the streets of Athens. A second bailout buys Greece time, but the market must be convinced that this will be the final time such a requirement is needed and until then, sentiment over sovereign debt within the Eurozone is likely to remain fragile.

The positive speculation this morning is helping to lift the banking sector, which has rallied over 1% in early trading on hopes that a second bailout will reduce potential losses to sovereign debt.

Also helping to provide the energy behind today’s gains is the oil sector, which has benefitted from a 1.4% sector gain on the back of the weaker US dollar index and a 1.4% gain in crude prices. The US dollar index is suffering its third day of losses of the last four sessions and is now trading at a near three-week low. The dollar weakness is helping to convince investors to recycle funds back into riskier asset classes such as stocks and commodities. As long as commodities see price gains, this is always likely to have a beneficial impact on the FTSE 100 Index, given how much commodity stocks are weighted on the UK Index.

Shares in Wolseley led the FTSE 100 leader board after a report in the Sunday press said that the firm had put a number of its businesses up for sale, including Encon and Electric Center. Woldeley also reports a trading update tomorrow so we have seen some speculative buying ahead of these too.

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