Second day of Gains for European markets

European markets are experiencing a second day of gains, tracing a positive session on Wall Street yesterday. The rebound, based on improved sentiment from hope that European leaders may agree on new measures to tackle its debt crisis, has been welcomed given the poor performance of the stock markets last week. This, coupled with strong inflation data for UK, has seen the FTSE gain 0.7% in early trading.

Although fears regarding the eurozone have dispelled slightly this week, traders are eagerly awaiting the summit of European leaders tomorrow, which they are hoping will provide some clear direction and some much needed stability. Meanwhile, it was reported that last night Greece’s central bank received almost €100 billion in emergency liquidity assistance (ELA) to fund its financial institutions. Other countries that have benefited from the facility include Ireland, who withdrew €41 billion and Cyprus, which withdrew another €4 billion.

With this in mind European leaders cannot afford to allow Greece to fail. The new French President is set to pitch Angela Merkel for a jointly issued Eurobond. This won’t be the first time Euro bonds will have been mentioned to the German leader, who is adamant that they are not the solution. However with the potential consequences of Greece exiting the shared currency weighing ever closer, perhaps Monsieur Hollande has more chance than ever for pushing the idea.

In a welcomed turnaround from last week, riskier assets are seen to be returning to favour today as traders continued to bargain hunt following the recent sell off. Miners and financials are among the best performers so far this morning, with Rio Tinto and Antofagasta both gaining over 3.4%.

Marks and Spencer’s managed to remain in positive territory with investors, despite announcing that their annual profits fell for the first time in three years. The high street giant saw profits fall 15.7% and also cut its short term sales growth target, although the full year dividend was maintained at 17p per share. Also reporting, Vodafone shares were in demand this morning, trading up over 2.7% after hitting sales forecasts and cutting revenue outlook on European concerns.

On a negative note for UK equities, Homeserve has seen its shares lose more than a quarter of their value after the group confirmed that it was to be investigated by the Financial Services Authority over “historic issues”. The company, previously involved in a possible mis selling probe which saw its trading suspended late last year, is now cutting back its operations in the wake of the problem.

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