UK stocks reversed early losses after the German parliament passed a key bill, approving the extension of Europe’s rescue fund and improving confidence in Europe’s ability to tackle its debt problems.
The blue chip FTSE 100 index rose 18.5 points (0.35 percent) to 5,236 by early afternoon after falling below 5,175 this morning.
The positive outcome was seen as a major victory for German Chancellor Angela Merkel, as failure to secure enough votes within her own coalition would have been disastrous for her credibility, potentially costing Merkel her job.
However, the EU is yet to agree on a specific plan to attack the problem and calm fears that the debt crisis will spread across the euro zone, triggering a financial meltdown.
The positive results of the German vote boosted banks with Barclays (LON:BARC, up 2pct at 169.8p), Royal Bank of Scotland (LON:RBS, up 2pct at 24.57p) and Standard Chartered (LON:STAN, up 1.8pct at 1,345p) emerging among the top risers in the top flight in afternoon trade.
Banking shares got more help from today’s decision by Italy and Spain to extend their bans on shorting financial stocks.
Food processing company Tate & Lyle (LON:TATE, up 3.6pct at 634.5p) topped the FTSE 100 leaderboard after saying it was on track to post another year of profitable growth.
Cairn Energy (LON:CNE, 2.7pct at 284.1p) also was on the rise, recovering from yesterday’s sharp decline after drilling another dry well in Greenland.
Meanwhile, hedge fund manager Man Group (LON:EMG, down 4.1pct at 172.7p) continued its freefall this moring, hitting the bottom of the FTSE 100 pile. The group lost a quarter of its value on Wednesday after reporting an 8.5 percent decline in its funds under management since June.
Moving to the other side of the Atlantic, US stocks rose sharply higher today after US weekly jobless claims data from the Labor Department came in far ahead of expectations.
The report showed a much bigger than expected drop in initial applications for unemployment benefits, which fell 37,000 to 391,000 last week, suggesting that the job market recovery is picking up speed.
Likewise, today’s GDP data also topped forecasts with the Commerce Department revising its GDP growth estimate for the second quarter from 1 percent to 1.3 percent, givign another boost to US stocks.
The Dow Jones Industrial Average (DJIA) rallied 238 points (2.2 percent) to reach 11,257 in morning trade in New York, while the broader S&P 500 index climbed 16.5 points (1.4 percent) to 1,165.
Today’s macroeconomic calendar in the US will also feature an update on existing home sales for August from the National Association of Realtors. Analysts polled by Bloomberg are expecting to see a 2 percent decline following a 1.3 percent decrease in August.
UK corporate news
Back in the UK, today’s corporate updates included a statement from interdealer broker ICAP (LON:IAP), which reported that group revenues in the six months to end-September expected to be marginally ahead of the same period of 2010.
The group added that its full year performance remains broadly in line with its expectations.
ICAP expects the recent high levels of volatility in financial markets to continue for the rest of the year.
“We remain confident that the diversity of our products and services will continue to assist our customers around the world to do business and reduce risk in these uncertain times,” said chief executive of ICAP Michael Spencer.
Compass Group (LON:CPG) also told investors that its expectations for its full year performance remain unchanged following a good performance in the fourth quarter, for which it expects to report a 4 percent organic growth.
For the full year, including the contribution from acquisitions, constant currency revenue growth is expected to be around 9 percent and organic revenue growth is expected to be around 5 percent, said Compass.
Moving to the banking sector, HSBC (LON:HSBA) has agreed to sell its retail banking business in Chile to Banco Itaú Chile. The value of the gross assets to be disposed of was US$20m at 31 August 2011.
The sale is expected to be approved in the final quarter of the year.
In oil and gas, BG Group (LON:BG.) has signed a heads of agreement with Gujarat State Petroleum Corporation for the long-term supply of up to 2.5 million tonnes per annum of Liquefied Natural Gas (LNG).