Miners fuel equity markets early Tuesday morning

Equity markets across Europe started the day in strong fashion following a host of positive trading updates. At 9am equity markets were in positive territory and approaching +1% gains or more. The FTSE was +73 points at 6059 (+1.23%), the DAX was up 58 points at 7136 (+0.82%), the CAC 40 was up 30 points at 4006 (+0.78%) and the FTSE MIB Index was up 212 points at 21555 (+1%).

The mining sector, heavily weighted in the UK, was the main driving force for the FTSE in early trading following a positive trading update from Rio Tinto overnight. The UK listed mining company reported record iron ore output for the fourth quarter;  it confirmed output was 50.1 million metric tons with analysts expecting a figure of around 46.1 million, with last year’s figure for the same period at 47.2 million. Iron ore production is the biggest earning area of the business, and with prices tipped to reach $250 a ton this year by Credit Suisse early this month, it is easy to see why the update was so well received by investors. Rio Tinto reached an early morning high of 4499p, up +2.6% on the day.

Banks, also heavily weighted in the UK, had a positive start to the day with HSBC leading the way, positing a high of 715.7p, up +1.7%. Lloyds posted a high of 69.83p up +2.5%, and RBS a high of 42.94p, up +1.56%.

Burberry, the UK listed luxury fashion label, spurred investors with an update at the top end of expectations. One stand out figure was like-for-like sales in China, which were up 30%. Following the update, Seymour Pierce raised their price target from 1059p to 1200p, citing “Burberry not only has significant geographical, product mix and leverage opportunities but operates in a market with long-term growth credentials geared to global growth.” They also retain their “buy” rating. Burberry posted a high of 1118p, up +5.57%.

One sore point with investors this morning was IG Group; the UK listed spread betting firm traded down this morning to a low of 463p, down 10.7%. IG Group posted a first half loss following an impairment charge of £123 million relating to its Japanese operation. IG Group reported a net loss of £80.4 million compared to a £50 million gain for the same period last year. It also commented that client activity in December was lower than expected as market volatility was subdued. The stock was cut to “add” from “buy” at Numis Securities. The stock has recovered somewhat and is now trading around 490p, down -5.5%.

Equity markets have started today in robust fashion following the relative inactivity of yesterday’s US holiday. A strong move this morning to the 6050 level will need be consolidated if we are to push on further this afternoon. We have UK CPI and RPI out at 9.30am (GMT), which may give some indication as to whether this morning’s rally has staying power, at least until our friends across the Atlantic return to the playing field. As it stands, this rally looks like it has strength and maybe this is now the time that 6050 becomes support and not resistance.