Markets recover as Investors eye up Central Bank decisions later in the week

European markets started the session higher following a bailout agreement for Cyprus and strong performances overnight both on Wall Street and in Asia after assurances of accommodative monetary policy from the Federal Reserve boosted risk appetite.

Liquidity provision by the central banks across the globe has driven the rise in stock markets this year despite the sluggish recovery in the world economy. Investors will be watching very closely this week as they search for reassurance that central bank support will continue and not be prematurely withdrawn. Comments last night by a US Federal Reserve official backing aggressive monetary stimulus has helped to keep hope in place for the US. Decisions by the Bank of Japan, the Bank of England and the European Central Bank due later in the week are expected to keep the current loose policies running or indeed add extra stimulus.

Of particular note, neither the inconclusive elections in Italy nor the Government spending cuts in Washington have prompted a sustained sell off in equity markets with pull backs being used as buying opportunities. However, concern over the withdrawal of stimulus is a key theme which could direct the market, especially in the short term.

By mid morning the FTSE was trading up 0.7%, whilst the DAX and CAC had gained 1.7% and 1.5% respectively.

Elsewhere in Europe, finance ministers agreed to a bailout for Cyprus by the end of March, although details of the 17 billion Euro package are yet to be arranged. Retail sales for the Eurozone also gave investors a reason to be cheerful showing a 1.2% improvement, above market expectation.

Additionally, Eurozone PMI data also came in better than forecast at 47.9 against an expected 47.3, however still below the January figure of 48.6. Activity remains weak outside of Germany and this may put pressure on the ECB to implement further support policies at the meeting on Thursday.

Here in the UK, Serco Group has topped the FTSE 100 leader board, up over 10% after reporting operating profits for 2012 of £287 million, an increase of over 8%.

Standard Chartered also reported today, posting record profits of $6.88 billion pre tax, but still below analysts’ expectations of $7 billion. The group also reported an impairment loss and credit risk provision of $1.2 billion, which is unusual for this bank which has enjoyed a decade of growth and few problems. The share price was up 2.7% by mid morning at 1828.

Looking to the afternoon a shortage of economic data here in Europe means investors will look towards US Non manufacturing composite due at 3pm GMT.

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.