View the article online at http://citywire.co.uk/money/article/a531163
Cautious start for FTSE after Merkel and Sarkozy agreement
Markets optimistic as Merkel and Sarkozy promise to find a resolution to the eurozone debt crisis in time for November’s G20 meeting.
Britain’s FTSE 100 opened on an optimistic note, making cautious gains following a pledge from French and German leaders to come up with a plan to ease the eurozone’s debt fears in time for November’s G20 summit.
The UK index of blue-chip shares rose 0.52%, or 27 points, to 5,331 and the Mid-250 index took on 0.14%, or 15 points, to 9,972.
Other stock markets in Europe were flat, with cautious trading following the weekend’s meetings. Germany’s DAX index inched forward 0.05% to 5,678, France's CAC 40 index took on 0.16% to 3,100, and the FTSEurofirst 300 index of top European shares increased 0.16% to 949.13.
Sunday’s meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy showed their commitment to solve Greece’s debt problems, protect European banks, and accelerate growth in the region by 3 November.
The details of how they will recapitalise the EU’s banks and the role of the European Financial Stability Fund (EFSF) have yet to be agreed on.
Michael Hewson, market analyst at CMC Markets, said that their views on use of the fund are what has caused divide so far, ‘with France keen to use the EFSF to deal with the problem, due to concerns about the pressure on its own triple “A” credit rating, while Germany is against going down that route, saying that the EFSF should only be used when local resources have been used up.’
Further discussion of the EFSF will get under way tomorrow, as Slovakia’s may vote against expanding the bailout package.
Fitch announced that Italian and Spanish government debt had been downgraded after markets closed on Friday. Italy was lowered from A+ to AA- and Spain was cut from AA+ to AA-.
The ratings agency also placed Belgium on review following the bailout of Dexia bank.
A deal was reached on Sunday evening on the breakup of the bank which will see 60.5% of the bank’s €90 billion assets covered by the Belgian government.
EU economic data released later in the day is expected to show the grim reality in the French and Italian industrial sector, with figures expected to show with a 0.7% decline in France and a 0.2% rise in Italy
Sterling took on 0.44% against the dollar to $1.56 and gold prices made gains to $1,659 an ounce.
Brent crude for delivery in next month added 0.53%to $106.44 per barrel and West Texas Intermediate crude for next month delivery rose 1.11% to $83.90.
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