A positive close for equity markets on a fairly volatile week

Friday, February 07, 2014

European equity markets rebounded strongly on Friday, ending the week positively as risk appetite returned to the markets. CAC, DAX and IBEX climbed higher between 0.49% and 1.08%, while the London benchmark index has extended gains for a third consecutive session to close above 6570 points, supported by a strong rebound in mining stocks.

On the macroeconomic front, US non-farm payrolls increased by less than initially expected in January, as retail companies and government hiring decreased after the Christmas holiday’s period. Non-farm payrolls rose by 113,000 in January versus expectations for 185,000 rise, while private payrolls also increased by 142,000 versus estimates of 185,000. However, the unemployment rate fell to 6.6% in January, spreading a more optimistic tone across Wall Street. The Dow Jones and S&P 500 have rebounded posting gains of 0.4% and 0.57%, respectively, at the time of writing.

In the meantime, the euro has rallied strongly, trading above the 1.36 level against the US dollar, offering strong support to mining and energy stocks as base metals prices and crude oil recovered. In London, ArcelorMittal reported strong earnings results with a robust outlook for 2014 owing to an economic recovery across the Eurozone. Antofagasta, Rio Tinto, Randgold and BHP Billiton gained between 1.43% and 2.34%.

It has a fairly volatile week including mixed economic data and fairly nervous trading conditions across the European equity markets, which have been watching for some clear direction. To summarise, interest rates decisions from the Bank of England and the ECB remained unchanged as expected, while we received fairly strong Markit PMI manufacturing and services data from the Eurozone. In the US, the employment conditions are covering but a bit slower than initially expected. The euro continues its upside momentum, offering some support to the markets. 

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