European markets gain in low volumes - US earnings eyed

Joshua Raymond, Market Strategist at City Index commented: "European Indices gained almost 1% on Monday to start the week well and recover some of last week's losses largely on bargain hunting. However, volumes have been lower with the US markets closed for Martin Luther King day and so this could be pushing equities artificially higher.

Investors remain cautious as we head into probably the most important week of the US earnings season with major banks such as Citigroup, Bank of America, Morgan Stanley and Goldman Sachs all set to announce this week. There is most certainly a degree of hesitation from investors to buy into banking stocks after JP Morgan's disappointing credit losses last week, and as such, banks have only posted some muted gains today.

The miners have been leading the charge higher for European equities today, and this is where we have seen the majority of the bargain hunting take place. The miners lost almost 7% last week and with Copper prices higher and the US dollar weaker today, the miners have been in strong demand.

International Power volatile

International Power has had a very volatile session, with shares at one point up as much as 9% and leading the gainers in London, only to close down almost 4% and be the worst performing stock on the FTSE 100.

Upon market opening we saw a rush of investors looking to speculate that the company may receive a bid from GDF Suez and this helped to spike share prices higher. However, as soon as International Power announced that talks with GDF Suez had ceased and no deal had been reached share prices plummeted as investors looked to exit positions.

Cadbury - Kraft deal in focus

The pursuit for Cadbury remains a focus as we move closer to tomorrow's deadline for Kraft to raise their bid. Share prices have gained over 6% since the 5th January on hopes that Kraft will return with a higher offer and there has been much speculation over the last few days that they may do so today, which is helping to lift share prices past the 800p mark.

It is looking likely that Cadbury shareholders are looking for a bid higher than 800p but it remains to be seen as to how high Kraft will have to go to entice Cadbury's shareholders to a deal. With the press speculating over the weekend that Hershey may launch their own offer this week, this could force Kraft's hands to increase their bid before tomorrow's deadline."