After a sorry performance over the first few days of September, the FTSE 100 index is off to a better start this morning, climbing 1% to 4845 by 9.45am, helped by strong banking and mining stocks.
The FTSE has now increased by around 14% this quarter, which is the largest percentage over such a period since late 1999.
Mining was one of the better performing sectors yesterday, and that story has continued this morning, benefitting from a number of broker upgrades to key players and also aided by the continuing strength in the price of metals, with spot gold up $2.29 at $989.55 per ounce this morning.
Lonmin was upgraded to ‘outperform’ from ‘underperform’ by Exane, which mentioned the possibility of Xstrata bidding for the platinum-mining company. Lonmin advanced 7.5% to 1550p, while Xstrata gained 2.4% to 837p.
Kazakhmys, the Kazakhstani copper giant, was also the recipient of an upgrade, this time from Morgan Stanley, who moved their recommendation to ‘overweight’ from ‘neutral’. Kazakhmys had climbed 4.6% to 992p by mid-morning.
Sentiment was also positive in Europe this morning, with the German DAX up more than 1% and the French CAC 40 up 0.7%, boosted by Goldman Sachs’ upgrade of its year-end price target for the DJ STOXX 600 year-end target by more than 10%. UBS also upped its 2010 forecasts of earnings per share (EPS) growth for European companies from 15% to 25 %.
‘In the very near term we are fully aware that the equity market looks somewhat overbought and appears likely to have some form of modest correction,’ wrote Nick Nelson, UBS's European equity strategist. ‘However, given our view on the bounce-back in earnings growth next year and increasing conviction that the economic cycle has turned, we feel the fundamental backdrop remains supportive’
The Financial Times also reported that Deutsche Telekom is taking part in discussions with Vodafone, France Telecom and Telefonica regarding the sale of its UK T-Mobile operation. Deutsche Telekom was trading at €9.30, up 1.9%.
In other European equity news, Peugeot Citroen announced that it has signed an agreement to develop an electric car in co-operation with Mitsubishi Motors, with the aim of producing the new vehicle by the end of 2010. The news helped push Peugeot Citroen’s share price up by 7.5% to €20.065.
Whether today’s buoyant stock prices will carry on will no doubt depend to a large degree on the outcome of this afternoon’s crucial labour data from the US: non-farm payroll figures and the unemployment rate will be announced at 1.30pm.
US firms are anticipated to have shed 230,000 jobs during August, down from 247,000 in July and the unemployment rate is predicted rise to 9.5%, up a touch from July’s rate of 9.4%.
If the figures do pan out this way, it will be evidence of some stabilisation in the labour market but will also stress how fragile the recovery is and therefore add weight to comments from Alistair Darling and Timothy Geithner ahead of the G20 meeting that it is too early to withdraw economic stimulus.
