European shares bounce back with vigour
• Sainsbury’s share jump double digits
• Insurers, Barclays up
• US stocks to open higher
• New Google Nexus phone hurts Apple shares
Having failed to sustain a break below the late August lows, European stocks are rebounding strongly with US index futures pointing to a higher open.
Supermarket shares were atop the FTSE 100
after a well-received update from Sainsbury’s with insurers including Aviva and Old Mutual top risers following Saga’s positive first half update that saw a rise in motor insurance policies.
Shares of Sainsbury’s jumped over 14% in early trading after the supermarket said profits would be “moderately” higher than expected this year. Profits at Sainsbury’s are still well down year over year but the slowing decline in like-for-like sales means 2015 profitability looks better than it did six months ago.
There’s a lot of jumping the gun on Sainsbury’s turnaround prospects today. The supermarket sector still faces huge pressure from the discounters, particularly now with Aldi’s intended entry into online shopping. Sainsbury’s is a household name, and retail investors especially, will keep trying to pick the bottom before profits grow again. An unusually large part of Sainsbury’s float is being shorted for a large cap stock so there’s some big time short-covering going on. Even the smallest sign that the worst is behind the big supermarkets is likely to see double digit reactions in share prices like today.
Barclay’s shares were up strongly as investors welcomed the bank’s intended exit from non-core markets in Europe. New Executive Chairman John McFarlane is taking the bank by the white collar and dragging it out of every market where the revenues don’t justify the resources put in.
A second day of recovery for Glencore shares after the company defended its solvency helped a broad recovery across the commodity space. Rio Tinto was top of the pack in a good day for the miners after the sale of its coal mine stake in Australia to New Hope. The mine sale gave Rio’s balance sheet a welcome boost in the context of fears of over-leverage in the sector.
US stocks look to end a bad quarter on a more positive note on Wednesday with the S&P 500 expected to pop back above the psychological 1900 level. It was a torrid session on Tuesday that saw more weakness in biotech and shares of Apple lost 3.5% after Google unveiled its new suit of Nexus Smartphones.
Ahead of remarks from Fed Chair Yellen at a conference later, there is ADP unemployment and the Chicago PMI. Both reports will be combed through by investors to judge the likelihood of lift-off in interest rates this year.
USA pre-opening levels
S&P 500: 21 points higher at 1,905
Dow Jones: 181 points higher at 16,230
Nasdaq 100: 53 points higher at 4,136
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