FTSE 100 Watch: Index Up on Syria Deal and Summers’ Pullout

on Sep 16, 2013

iNVEZZ.com, Monday, September 16: The Footsie today gained in morning trading after the threat of a military strike on Syria diminished and a leading candidate to replace U.S. Federal Reserve chairman, thought to be more likely to aggressively curb the Fed’s economic stimulus measures, withdrew from the race.

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The FTSE 100 was up 59.88 points, or 0.9 percent, at 6,643.68 as of 9:19 BST in London. The volume of shares in FTSE 100-listed companies changing hands was 7.2 percent above the 30-day average, Bloomberg reported.
The U.S. and Russia agreed on Saturday to demand initial inspections of Syria’s stockpile of chemical weapons by November and gave President Bashar al-Assad a week to declare the government’s arsenal.

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“My feeling with Syria is that it’s now an identifiable, isolated problem which can start and stop with the removal of chemical weapons,” Bloomberg quoted said Henry Dixon, a London-based fund manager at Matterley, a unit of Charles Stanley Group Plc, as saying. “That seems to be a palatable outcome to a potentially toxic situation.”

After former Treasury Secretary Larry Summers withdrew his nomination for Federal Reserve chairman investors bet that the U.S. central bank will adopt a more gradual approach to reducing its equity-friendly bond purchases with Janet Yellen, viewed as Summers’ main and current Chairman Bernanke’s second-in-command remaining in the race. The Fed starts a two-day meeting tomorrow, the outcome of is expected to be the decision to cut the monthly bond purchases that have driven much of the global equity rally and propelled the FTSE 100 12.5 percent higher since the start of 2013. Janet Yellen is thought to be more likely to continue Bernanke’s growth-focused policies.

“Our basis hypothesis is that the central bank will remain behind (markets) and with Ms Yellen there is no doubt that it will be that way,” Reuters quoted François Duhen, a strategist at CM-CIC Securities in Paris, as saying. “For stock markets this is obviously favourable.”
Financials today led the rise in Britain’s blue-chip index, with Barclays up 1.8 percent after Nomura upgraded its rating on the stock to “buy” from “reduce”, citing the bank’s exposure to signs of improvement in the economy.

!m[Financials Lead Rise in Footsie, Miners Decline](/uploads/story/5493/thumbs/pic1_inline.jpg)
EasyJet Plc (EZJ) and British Airways parent International Consolidated Airlines Group (IAG) gained more than 2 percent each with oil price down on easing concerns over the threat of an imminent military strike on Syria. Insurers Standard life and Prudential were also up by more than two percent each.
Fresnillo was the top loser on the Footsie 100 due to the possibility that the Mexican-based miner could be subject to a 7.5 percent mining royalty proposed by the Mexican government.
Other mining stocks also fell with Eurasian Natural Resources Corporation down by around 2 percent and Randgold Resources down nearly one percent, negatively impacted by recent falls in the gold price.


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