A daily look at the Markets from Joshua Raymond, Market Strategist, City Index.

European markets lost ground on Friday, with Indices being weighed down by a weaker session for commodity stocks but the loss was not enough to deter the FTSE 100 from posting a 7th straight week of gains.

Earnings justify investor confidence

The FTSE 100 has now posted weekly gains on 9 out of the last 10 weeks and this re-affirms just how much confidence there is amongst investors as global economies recover and company earnings improve. This week, with Intel, JP Morgan, General Electric and Bank of America all announcing forecast beating results, it seems that the confidence that has been shown by investors over the last 10 weeks has been justified so far.

Earnings continue in full flow next week with a number of crucial company’s reporting including; Citigroup, Goldman Sachs, Apple, Microsoft and Morgan Stanley, all of which will help to bring the corporate recovery into greater visibility.

Banks 1-0 Miners

Today’s session has largely been dictated by a battle between the banks and the miners.

The banks have continued to rally in strong demand, benefitting from better than expected Bank of America results. Royal Bank of Scotland shares have also been flying today after BofA/Merrill Lynch issued a very positive note stating that RBS shares could double over the next two years. RBS shares have been in high demand all day on the back of this and top the FTSE 100 leader board, rallying over 6% in the process.

However, the mining sector has been particularly weak, tracking metal prices lower and this has helped to erase much of the gains in the banking sector.

Greece worries continue

The Greece situation remains a key concern amongst investors and looking at the yield on the Greek 10 Year government bonds, it appears that market confidence on the prospect of a Greek default remains on a knife edge. Greece seems now to have moved a step closer to requesting use of the EU’s €30bn emergency loan and we have seen the Euro sell off against the US dollar as a result, with yields on the 10 year Greek bonds trading above the 7% mark again, nearing last weeks record high.

The UK Election

We have seen an impact from last nights first TV debates on the strength of the pound today, which has weakened against the US dollar.

It seems unanimous that Nick Clegg was the biggest beneficiary last night but the key influence today has been the fact that David Cameron’s performance does not seem to have been enough to pull the Tory’s further away from the Labour party and therefore the markets are no closer to predicting the result.

Should last nights debate sway more undecided votes towards the Liberal Democrats, it could eat into the narrow lead the Conservatives have and this bring closer to reality the prospect of a hung parliament. The reaction in the market has been to short sterling by and large so far in case a hung parliament does happen.

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