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Merkel win fails to inspire Fed-obsessed FTSE
by Chris Marshall on Sep 23, 2013 at 09:55
Neither Angela Merkel’s victory in the German elections, nor more signs of an economic recovery in the eurozone could convince investors to buy European shares, as Fed fretting prevented any strong gains.
The FTSE 100 was stuck just below 6,600 after comments from James Bullard, a senior US Federal Reserve official, at the end of last week that the central bank could begin cutting back its monthly bond purchases at its October meeting if the economic data allowed for it. Only last week the Fed surprised markets by maintaining the scale of its £85 billion monthly spend.
European shares managed small gains on Monday morning, with Germany’s Dax 0.2% higher after Merkel won a third term as chancellor. However, her failure to secure an absolute majority means she is expected to seek a ‘grand coalition’ in parliament, capping market gains.
'Ultimately, Angela Merkel and the CDU/CSU were the clear victors, and as such this is a positive backdrop for investors into European equities,' argued David Moss, director of European equities at F&C Investments.
Having moved higher earlier, the euro was little moved against the US dollar at $1.3514.
Concerns about Fed policy also overwhelmed more signs of economic recovery in Europe. The ‘flash’ Eurozone Purchasing Managers Index (PMI) reached a 27-month high of 52.1 in September, up from 51.5 in August.
The Chinese economy was also showing signs of improvements. The HSBC flash manufacturing PMI for China beat market expectations to jump to 51.2 in September from 50.1 in August.
‘It supports our call that there has been a strong sequential economic rebound since late July,’ said Bank of America Merrill Lynch economists.
In London Aberdeen Asset Management (ADN.L) was the top riser, up 2.7% to 397p after telling investors that profits for the year to September are expected to be towards the upper end of current market expectations. The emerging markets-focused group also reported that overall assets under management (AuM) had fallen to £201.7 billion, 3% lower than at the end of June.
‘While the recent EM volatility feeds into Aberdeen’s share price, we believe the investment case remains sound and we reiterate our Buy recommendation and 450p target price’, commented Stuart Duncan of Peel Hunt.
A new name in the FTSE 100, Coca Cola Hellenic Bottling Company (CCH.L), was the biggest loser, down 2.2% to £18.28.
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