European share markets looking chirpy again, extending Monday’s gains as sentiment continues to improve. Global investors continue to ride the wave of optimism painted by the stronger US jobs data out on Friday together with the BOE and ECB pledging to stand behind easing measures. Asian markets put in a good performance overnight following losses in the previous session, helping to support prices here in Europe but Chinese shares failed to gather pace as inflation data from the country indicated slowing growth.
China’s slowing growth fears have been put aside in Europe this morning as investors are comforted by Alcoa kicking off the US earnings season by beating expectations. The Stoxx 600 basic resource index advances this morning on the back of Alcoa’s results. The aluminium giant did warn of a bribery probe brought by the US DOJ but that did little to unsettle investors as the company posted an 11% increase in Chinese aluminium demand. This came as a surprise to the market as many expected the aluminium giant to incur losses on China’s recent slowdown.
Closer to home, Greece managed to secure EUR4.8billion of bailout funds from its international creditors, putting investors at ease for now over the euro zone debt situation which has reared its ugly head in recent days. EU finance ministers did warn that Greece has its work cut out to stay on track of its bailout programme but the approval for funding couldn’t have come at a better time for investors worried about the periphery given the recent political rumblings out of Portugal.
On political instability, Egypt remains a concern for global investors as the turmoil there turns increasingly violent with ousted President Morsi’s Muslim Brotherhood party calling for an uprising after security forces in the country opened fire on Morsi supporters. Last week at ETX Capital we reported that tensions have escalated between the Brotherhood and the military who are blaming each other over the violence, fuelling further clashes between Egypt’s highly divided population. Fears over disruption of oil supply passing through the Suez Canal keeps oil prices elevated. The Cairo market slid 3.6% on Monday, hit not only by the turmoil in Egypt but also Fitch Ratings on Friday cutting the country’s credit rating, citing the political turmoil and noting that IMF’s loan for the country looks further out of sight now.
Marks and Sparks trading update:
So Marks & Spencer put out its Q1 trading update which sees the retailer post its 8th consecutive quarterly fall in clothing sales but the stock prices is currently tracking higher, with equity investors unsurprised by this. Indeed, M&S’s declining clothing retail operation is well flagged to the market and this is not an isolated problem for M&S but across its peer group so the market is again giving management at the retailer the benefit of the doubt. Although the performance of the clothing business remains a concern for the market, the performance of food sales, multi-channel revenues and international sales were respectable on the whole during the period.
CEO Mark Bolland is attempting to revive the fading clothing business where LFL sales have slid for the past two years and although has failed so far, there seems to be some optimism in the market that the new Autumn-Winter collection and the new clothing line from style director Belinda Earl which will arrive in stores this month may be enough to get customers to give the clothing section a chance, instead of just visiting M&S for the food. And, though M&S management sounded off a cautious tone about challenging trading conditions, the market has been energised by the improving trend of UK economic data in Q2’13, the BOE’s accommodative monetary policy and of course, better weather conditions which encourage increase footfall.