The relief rally on yesterday’s EU debt deal continued today with banks leading the blue chips in London.
Yesterday’s €109 billion bailout deal for Greece inspired confidence that EU officials have Europe’s fiscal problems under control and are doing enough to prevent another financial meltdown.
The EU had a number of issues to resolve, including the participation of private investors in the Greek bailout
In the end it was agreed that the private sector would contribute €50 billion to the rescue package on top of the €109 billion from the EU and the IMF.
Banking stocks benefitted the most from the Greek deal, which eased concerns about their exposure to European debt.
Part-nationalised bank Royal Bank of Scotland (LON:RBS) was the top riser in the FTSE 100 in early afternoon, advancing 4.4 percent to 37.63 pence. Sector peer Barclays (LON:BARC) followed, climbing 3 percent to 247.15 pence.
Optimism over EU’s debt situation and a decline in the US dollar propped up base metal prices today, providing support for resource stocks.
Vedanta Resources (LON:VED) made it to the top three risers in the FTSE 100 in early afternoon. The stock advanced 3.1 percent to 1,906 pence, while Anglo American (LON:AAL) advanced 2.4 percent to 3,061 pence.
Another factor driving up metal price was a strike at the world’s largest copper mine Escondida in Chile, operated by BHP Billiton (LON:BLT).
Amid the absence of macroeconomic data, traders are keeping a close eye on today’s US corporate data.
Today’s earnings reports have so far been positive with General Electric (NYSE:GE) and oilfield services group Schlumberger (LON:SLB) both reported better than expected quarterly results.
Schlumberger said its earnings soared 65 percent to US$1.34 billion in the second quarter as revenues jumped 62 percent to US$9.62 billion.
General Electric also did well during the second quarter, achieving profit growth of 21 percent despite a 3.5 percent decline in revenues to US$35.63 billion.
Wall Street preview
Stocks in the US are expected to rise this morning. Futures for the blue chip Dow Jones Industrial Average (DJIA) rose 45 points (0.35 percent) in early trade, while futures for the broader S&P 500 index advanced 3 points (0.25 percent).
While the Greek problems seem to be in the rear view in Europe, the US is still waiting for President Barack Obama and the Congress to agree on a deal to raise the country’s debt ceiling.
It was reported today that Obama and speaker of the Republican controlled House of Representatives John Boehner have worked out a plan to reduce the US debt by US$3 trillion over the next decade.
The plan calls for steep reductions in spending cuts, but does not include any tax hikes for at least two years, which drew the ire of Democrats.
Should the lawmakers in Washington fail to reach agreement by the 2 August deadline, the US could go into a debt default.
Today’s pre-market movers in the US included Schlumberger and General Electric, which climbed 2.8 percent and 1.5 percent on today’s earnings report.
Shares in Caterpillar (NYSE:CAT) were headed in the opposite direction in pre-market, dropping 5 percent.
News Corp (NYSE:NWSA) was down 1.7 percent amid reports that the US Justice Department is preparing to issue subpoenas for the company as part of the ongoing investigation of phone hacking claims.
UK corporate news
Today’s corporate updates in the UK included a trading statement from Vodafone (LON:VOD), which drew the most attention in the FTSE 100 after releasing a trading statement. The telecom major reported that revenues across the group climbed 2.5 percent in the quarter to end June.
The sales growth was largely due to strength in emerging markets, where revenues climbed 5.8 percent.
“We have made a good start to the year, reporting robust results despite challenging macroeconomic conditions across southern European economies and the impact of cuts to mobile termination rates,” said chief executive of Vodafone Vittorio Colao.
Investors liked the news as shares in Vodafone climbed 3.5 pence (2 percent) to 164.8 pence in afternoon trade.
Outsourcer Capita Group (LON:CPI) has also benefitted from a positive update today, climbing 14 pence (2 percent) to 700 pence. The company said this morning that it has acquired the pensions administration and software business of NorthgateArinso for £27.5 million.
Capita said that the deal will boost its existing pensions management and administration business Capita Hartshead.
This was not the only acquisition announced by a FTSE 100 company today.
Credit information group Experian (LON:EXPN) told investors today that it has bought Virid Interatividade Digital, a Brazil operating email marketing company.
The financial details of the deal were not revealed.
Virida posted revenues of US$5 million in 2010 and had gross assets of US$1 million at the end of the year. The announcement was met with a lukewarm response from investors. Shares in Experian rose 3.5 pence to 819.5 pence.
In the FTSE 250, airline easyJet (LON:EZJ) emerged as the top riser in afternoon trade, soaring 53.4 pence (17 percent) to 366.1 pence after reporting that its revenues jumped 23.2 percent to £935 million in the June quarter.
Easyjet now expects to post a full year profit of between £200 million and £230 million.