European Stock Markets Bounce on Economic Recovery Hopes

Strategic Insights -

Optimism surrounding a strong economic recovery in the UK contributed to a significant bounce in European stock markets yesterday. London's FTSE 100 index rose 2.6%, or 139 points, to close at 5397. Key gainers included Intertek, which lifted its full-year revenue forecasts, and British Airways, whose price target was raised by analysts. The UK's manufacturing sector also expanded for a 10th consecutive month in July, exceeding economists' expectations and contributing to the pound's rise against the US dollar.

Key Takeaways:

  • Intertek added 6.1%, or 97p, to pounds 16.72 after lifting its full-year revenue forecasts, with first-half sales rising 4.9% to pounds 652m and pre-tax profit gaining 3.3% to pounds 97m.
  • British Airways added 5%, or 11.3p, to 227.3p after its price target was lifted by analysts at Citigroup and the Royal Bank of Scotland, driven by hopes for cost cuts through its planned joint venture with American Airlines.
  • Tullett Prebon rose 5%, or 19p, to 360p as CEO Terry Smith hinted at the possibility of attracting another bidder, despite no ongoing takeover talks.
  • HSBC led a strong increase in bank shares after its half-year profit more than doubled, driven by a decline in bad debts.
  • Sterling rose to a five-month high against the US dollar on optimism that the UK economy is recovering faster than expected, following a report showing UK manufacturing expanded for a 10th consecutive month.
  • The euro also rose against the US dollar, adding 0.2% to $1.3078.
  • Wheat prices continued their rally, reaching a 14-month high of $6.61/bushel, driven by fears of possible wheat export controls in the Black Sea region.

Statistics:

  • The FTSE 100 index rose 2.6%, or 139 points, to close at 5397.
  • Intertek's first-half sales rose 4.9% to pounds 652m.
  • British Airways price target was raised by 15p to 295p.
  • HSBC's half-year profit more than doubled to $11.1bn (pounds 6.99bn).
  • UK manufacturing PMI fell to 57.3 in July, from 57.6 in June.
  • Wheat prices rose by more than 5% to reach a 14-month high of $6.61/bushel.
  • The pound rose 0.8% to $1.5816 against the US dollar.
  • The euro rose 0.2% to $1.3078 against the US dollar.

Sources:

  • [Guardian]
  • [Reuters]
  • [Citigroup]
  • [Royal Bank of Scotland]
  • [HSBC]
  • [Markit/Chartered Institute of Purchasing and Supply (CIPS)]
  • [Forex.com]
  • [Barclays Capital]