European stocks gain on Greece hopes but US consumer confidence

Giles Watts is Head of Equities at spread betting provider City Index. This is his daily report of the EU market activity for 31st May, including a gain for European stocks.
By: City Index
 
June 1, 2011 - PRLog -- Giles Watts is Head of Equities at spread betting provider City Index (http://www.cityindex.co.uk/). This is his daily report of the EU market activity for 31st May, including a gain for European stocks.

“European stock indices gained on Tuesday by between 0.6% and 1.5%, buoyed by hopes that a resolution to help Greece meet its debt liabilities is nearing. However, a surprising fall in US consumer confidence for May weighed on stocks towards the close.

News that Germany was considering dropping its calls for an early restructuring of Greek bonds has helped boost optimism that, after weeks of nervous hesitation and speculation concerning the potential for a Greek default, a solution in the form of a second bailout could well be on the cards. It is this optimism that has helped to drive equities higher across Europe today, with the German DAX seeing its best day of gains for six weeks.

Banks have been a key driver behind today’s gains in stock indices, as one might expect, with investors gaining in optimism that a Greek bailout will aid bank exposures to sovereign debt. The oil sector has also seen strong gains, largely triggered by the 2% gains in crude oil prices also. Today has seen a shift towards higher risk appetite, a fact reinforced by the third day of losses for the greenback US dollar. However, sentiment over Greece’s debt situation remains far from certain and remains somewhat fragile, giving potential for quick bouts of profit taking on the back of today’s strong gains.

We have seen buyer demand in housebuilder Wolseley as traders speculate the firm may report strong numbers tomorrow. The buyer interest we have seen has also been triggered by reports in the Sunday press of various asset sales by the firm with today being the first trading day for investors to make their move after the long bank holiday weekend. Wolseley shares jumped 3.5% today, making it the best performing equity on the FTSE 100 Index.

On the downside was Lloyds Banking Group, which badly underperformed the strong banking sector today. News that the bank is placing its bonus scheme under review in a move to curb reckless risk taking by employees is giving investors concern that it will drive away the bank’s top talent.

A surprising fall in US consumer confidence did dampen price action going in to the close however, with the figure falling from 65.4 to 60.8 in May, when it had expected to rise marginally to 66.5. The fall toed a similar disappointing theme to that of Chicago manufacturing data, which also badly missed consensus estimates. Manufacturing fell from 67.6 to 56.6 in May, a much more severe fall than the market had expected, with new orders and production figures both bitterly disappointing the market. Today’s US economic data gives a rather sour taste ahead of the all-important US jobs data due out on Friday in the shape of non-farm payrolls.”

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As a group, City Index transacts in excess of 1.5 million trades every month in over 50 countries worldwide. We provide a wide range of instruments including forex, CFD trading and spread betting. For more information, visit http://www.cityindex.co.uk/.
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Source:City Index
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