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Markets surge as commodities rebound

Equity markets began trading strongly this morning, risk sentiment boosted by comment from the European Central Bank that an extension of the EFSF, the regions bailout fund, was being considered. ECB Governing Council member Ewald Nowotny made the suggestion at Harvard University yesterday evening, however he added that “it might not be a trillion Euros”, a detail that seemed to have been overlooked given that market rumours had previously hinted towards a €2 trillion figure. The market’s positive reaction also came on a day that saw the German finance minister Wolfgang Schaeuble describe an increase in the EFSF as a “silly idea”.

The news was however enough to spur a rally in risk assets, the FTSE 100 surging 100 points or more than 2%, led higher by banking stocks and downtrodden miners. The latter were boosted as commodities reversed their previously negative trend, silver the stand out performer which at one stage saw a 15% gain to $33.50 per ounce. Gold saw a 2.7% increase by the close of trade, with Brent crude higher by 3.1%.

Confidence was augmented shortly before the US market open as figures from S&P/Case-Shiller showed that American home prices in 20 regions had fallen 4.1% for the year to July 2011, better than the 4.4% drop anticipated by economists. The FTSE 100 continued its upsurge throughout the day, finishing 205 point higher (4%) at 5294. The top five performers all gained more than 10%, the oil and gas group Essar Energy punctuating the miner’s dominance of the top positions. Autonomy was a laggard on the day although remarkably it still achieved a 0.2% gain. The CAC and DAX gained 5.7% and 5.3% respectively.

This was posted in Bdaily's Members' News section by John Dance .