The FTSE 100 closed higher by over 1% on Monday with the markets optimistic that the Federal Reserve could announce additional stimulus measures to keep the economy on the road to recovery when they meet tomorrow night.
To some, today’s price action in the spread trading markets could be a little confusing. For the markets to rally over 1% on the next available trading day after some really disappointing nonfarm and private payroll figures may seem a bit perverse.
Clearly however there are lots of investors out there that feel Friday’s jobs data and indeed recent weaker economic data could spur the Fed into much needed action. Investors are also somewhat impressed that the Fed are prepared to be proactive and act now to maintain the recovery rather than adopt a wait and see approach.
Of course much of this is now reliant upon the Fed actually acting when they meet tomorrow and this raises the prospect for equity weakness should nothing actually occur.
Banks and energy firms lead gains
It is the banks and energy firms that have been the main drivers behind today’s Index gains. Indeed much of the 1% gains in the FTSE are a direct result of positive price action in HSBC, Barclays, BP and Shell, which have all contributed to as much as 20 points of the FTSE’s rally.
However, Royal Bank of Scotland was one of the weakest performing equity in the FTSE 100 today, underperforming the stronger banking sector. RBS share prices have lost over 5% since reported their earnings on Friday.
International Power up on tie up hopes
We have seen strong demand for International Power shares today, with the stock trading higher by over 4% near the top of the FTSE leader board on reports over the weekend that GDF could offer a special dividend of £1.2bn-£1.3bn to Intl Power’s shareholders when they report their first half earnings tomorrow morning. The two firms have been working on a tie up deal for the last month.”
The above comments from Joshua Raymond, Market Strategist, City Index.
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