Stocks bounce higher on a day of choppy trade after China investment report
The FTSE 100 saw gains of around 1% on Friday, whilst peer EU indices the DAX and CAC saw stronger gains of 1.5% – 2% as investors reacted positively to speculation that China was set to invest $300 billion into Europe and the US and continued to digest the output of a new EU accord that isolates the UK.
It has been a very choppy trading session after a morning of somewhat mixed trade, with indices swinging between losses and gains, as investors digested the outcome of the new EU accord between at least 23 of the 27 EU members.
Though it seems that as the day has progressed, investors have started to digest the seeming isolation of the UK better and reacted warmly to the measures announced to bring about a greater fiscal union.
No thumbs up yet
Whilst the attempts to bring about a greater fiscal union is essential, with certain measures such as greater budgetary responsibility and sanctions for growing deficits past the 3% level was well received by the markets, confusion still rages as to how the legality of the ‘treaty within a treaty’ will work. And even more so than this confusion, investors still want to see a greater role of the ECB in bond purchases, a role that Draghi poured cold water on yesterday.
The scale of bilateral loans to the IMF, €200 billion, and the capped €500 billion level of the permanent bailout fund, the ESM, was already well leaked in the markets this week and therefore was of no real surprise. So whilst the reaction in the markets today to the EU Summit thus far has been warm, it is not necessarily a big thumbs up either. One cannot help sense that despite EU leaders calling the summit as the final chance to save the eurozone, the can has simply been kicked further down the road.
Speculated China investment gives stocks a boost
Speculation that China is seeking to use its huge reserves to invest some $300 billion into Europe and the US boosted hopes that perhaps China may well come to the rescue of Europe in the end, and boost liquidity in the region. As soon as speculation of this entered into the markets, stock prices were lifted and this helped to give Indices a fillip to push higher into the close.
Banks led the FTSE’s afternoon charge higher, with Lloyds Banking Group, Barclays and Royal bank of Scotland the top gaining stocks in London trade, rallying 5%-6%. Miners closely followed the big three UK banks, with stocks such as ENRC and Kazakhmys rallying over 2% in trading after copper prices rose over 1%.
A stronger than expected rise in US consumer confidence also gave investors a chance to look outside of developments in Brussels for a change. US consumer confidence rose to a new six-month high reading of 67.7, higher than most had expected, which was for a rise to 65. The stronger than expected reading comes hot on the heels of general US economic data outperforming of late and breeds confidence that US consumers may spend well this Christmas on the US high streets despite the economic headwinds.
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.
© City Index 2024