Bargain Hunting Boosts European Equities

Posted on | June 3, 2010 |

Investors were encouraged to buy back into shares today having seen a sharp recovery in the Dow Jones last night, which closed higher by 2.25%, and economic data reminded that the recovery remains on track.

Both factors helped to surge EU Indices higher by over 2% in early trading, helping to recover some of the ground lost earlier in the week.

The sharp rise in the US markets last night towards the close has certainly installed some confidence in Europe and this set us up for a positive opening.

Confidence has improved further by robust economic data with yesterdays Pending US Home Sales and today’s Euro zone PMI both beating market expectations, whilst the Final Services Employment Index showed the first jobs growth in 2 years.

Retail Sales out of the euro zone did however put a dampener on the day with sales plunging in April by 1.2% when a growth of 0.1% was expected. This was largely overlooked by the market however.

The recent economic data is helping to remind jittery investors who remain cautious over the sovereign debt situation in Europe that the economic recovery continues.

Investors have a strong gaze towards US labour data with ADP employment change announced later this afternoon and Non Farm Payroll’s due out tomorrow. The market is expecting tomorrow’s Non Farm Payrolls to be strong, with current expectations that they will show the strongest monthly jobs gain since September 1983.

Interestingly, this line was reinforced by President Obama yesterday which has helped to trigger investors into buying equities on the hope that tomorrow’s jobs data will in fact be strong.

BP Shares Rises on Bargain Hunting

We have seen investors coming in to pick up energy firms and miners after weakness this week. BP shares have been targeted by the bargain hunters particularly having seen its shares fall by as much as 37% since the start of the oil leak in the Gulf of Mexico. BP shares currently top the FTSE 100 leader board, rising 4.5%.

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By Joshua Raymond, Market Strategist, City Index.

The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.

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