Investors enjoy good start to the year
Stock market investors have had a joyous start to 2013, with stocks in Europe rallying to their highest point in 22 months on the first trading day of the year. Bearish sentiment crumbled as Washington passed a budget Bill that means the world’s largest economy has avoided the “fiscal cliff” for now.
A purchasing managers’ index for the Chinese manufacturing sector and a report on US manufacturing also fed into the upbeat mood.
However, further US political showdowns are expected over the next two months, which could result in increased share price volatility, analysts warned, with some suggesting that equity markets had been “overbought”, leaving them vulnerable to a correction.
The Iseq index climbed in tandem with European stocks in the early morning and sustained its gains throughout the session, closing up 1.75 per cent.
Building materials group CRH was the most heavily traded stock on the day, rising 3.6 per cent to €15.85, a gain of 55 cent.
Paper and packaging company Smurfit Kappa was among the cyclical stocks to benefit from the day’s buoyant mood, rising 2 per cent to €9.18. Bookmaker Paddy Power climbed 1.6 per cent to €63.50, while drinks group CC closed up 1.6 per cent at €4.63.
Banking stocks across Europe also advanced, with Bank of Ireland adding 4.4 per cent to finish at 12 cent.
The FTSE 100 broke back through the technically important 6,000 mark in the morning and stayed above it for the rest of the session, closing up 2.2 per cent.
Mining stocks led the rally on the index of blue-chip shares, with Rio Tinto soaring 5.2 per cent to 3,695 pence, the highest price in 10 months, and Anglo American surging 5.7 per cent to 2002.5 pence.
BAE Systems climbed 4.1 per cent to 350.6 pence. The UK military-aircraft manufacturer, which gets about 45 per cent of revenue from the US market, may benefit from the budget Bill’s two- month delay to scheduled spending cuts to military programmes.
Supermarket stocks fell, with Morrisons and Sainsbury’s among the select few fallers in the top flight.
The only other FTSE 100 stock to decline during the session was British American Tobacco.
Germany’s Dax rose 2.2 per cent, while France’s Cac 40 index advanced 2.55 per cent as markets powered ahead, with all 19 industry groups in the Stoxx 600 making gains.
Automotive stocks did big business, with Volkswagen, Europe’s largest carmaker, climbing 3.7 per cent to €178.55, Porsche gaining 2.6 per cent to €63.29 and BMW adding 3.9 per cent to €75.74.
ArcelorMittal, the world’s biggest steelmaker, rose 4.5 percent to €13.51, as China Steel and Posco led a group that agreed to pay $1.1 billion for a 15 per cent stake in an ArcelorMittal subsidiary based in Canada.
A.P. Moeller-Maersk advanced 4.4 per cent to 44,480 kroner as the head of north Asia operations for its container shipping unit said trade between Asia and Europe will grow.
Stocks in New York extended a two-day rally and commodities surged, with the Standard and Poor’s 500 Index advancing 1.8 per cent by early afternoon, its best gain since November 19th.
A report on US manufacturing suggested the industry expanded in December at a pace that points to stabilisation after reaching a three-year low a month earlier.
Technology and financial companies led gains as all 10 of the S&P 500’s main industry groups jumped more than 1 per cent, sending the gauge to its highest level since October. Hewlett-Packard, Caterpillar and Bank of America surged at least 2.9 per cent.
(Additional reporting: Bloomberg / Reuters)