UK and European markets rallied on Monday as optimistic market sentiment was carried forward from last week. Over the past few days, a number of European leaders and central bankers have issued statements and made speeches saying they will do whatever is necessary to keep the eurozone together and functioning efficiently, which has given market sentiment a boost.
“Investors and traders seem content to believe the words of Europe's head honchos and have pushed the markets to a level that prices in some action to back up the words of the weekend. A visit from US Treasury secretary Tim Geithner (who met with Germany’s finance minister) is adding to the enthusiasm, as it seems like a 'more the merrier' approach to solving Europe's problems is helping things along,” said Will Hedden, a sales trader at IG Index.
Geithner and Germany’s finance minister issued an official statement on Monday saying they spoke about “the need for ongoing international cooperation and coordination to achieve sustainable public finances, reduce global macroeconomic imbalances, and restore growth ... (Both officials are confident) in Euro area member states’ efforts to reform and move towards greater integration.”
Over the last three trading days, from Thursday morning until the close of trading on Monday, the FTSE 100 index has surged ahead by 3.5%. During trading on Monday, the benchmark index added 1.2% to its total value, closing at 5,694. The mid-cap FTSE 250 index also staged a run-up, adding 60 points, or 0.5%, to close at 11, 239.
While the vast majority of companies traded on the FTSE 100 pushed higher on Monday, airline operator IAG (IAG) was the market leader. Shares in the company jump up by just over 7%.
“British Airways owner IAG has taken off ... thanks to an analyst-beating set of numbers from Air France (AF), who in turn have jumped 17%,” said Hedden.
The standout market laggard amongst the FTSE 100 companies on Monday was the publishing group, Pearson (PSON). Shares in the company that publishes the Financial Times have been sliding after the firm reported weaker-than-expected earnings results for the first six months of 2012.
“Pearson's first-half results were a bit weak, but clearly demonstrate that the publisher has a solid competitive advantage and is capable of generating decent growth in its various education businesses,” said Morningstar analyst Michael Corty in his latest research report about the company’s financial health. “Looking ahead, we still think Pearson is clearly best-in-class relative to other education publishers like McGraw-Hill (MHP).”
The global bank, HSBC Holdings (HSBA), also grabbed headlines on Monday as it reported earnings results for the first six months of the year. The company’s CEO, Stuart Gulliver, apologised for the firm’s “past shortcomings” in relation to money laundering and compliance failings. But he also boasted that the company “recorded underlying revenue growth and continued to make substantial progress in key areas.” Shares in the banking group jumped by over 2%.
