European markets rebound as US GDP data boost confidence

Joshua Raymond, Market Strategist at City Index commented: "European markets firmly rebounded to end the week on a positive note as investors returned to the market with full vigour. The general mood we have seen today is investors feeling that the recent 8% fall on the FTSE 100 and 9% on the DAX was a bit excessive and had been oversold.

The majority of clients have however picked up the Index shorter term contracts which would emphasise that there is a belief certainly in the short term, there could be a bounce.

GDP raises confidence

Investors started the day positively with the banks and the miners both in high demand after recent economic uncertainty forced both sectors heavily lower. Early gains were capped at the 5190 level on the FTSE with some investors looking to lock in their profits at this level as we ran up to the important US GDP figure.

However, investor confidence was raised further with US GDP rising by 5.7%, much higher than the 4.6% anticipated and this welcome surprise helped to encourage more investors back into the market pushing the FTSE 100 back through the 5200 level.

It has been an interesting change of tune in the markets today and the fact that equity gains continued to grow throughout the session helps to reinforce the fact that confidence has not been significantly damaged by recent losses and investors are still willing to weigh into the riskier equities.

The key will be to gain some upside momentum and if we do this, then more of the investors who got burned out by recent equity losses could be encouraged to come back into the market.

Banks in demand

The banks have been in high demand all day. Investors have been buying into Barclays and HSBC with both stocks outperforming a stronger banking sector despite underlying concerns on Royal Bank of Scotland's $8bn lawsuit from O'Neill Properties Group. The lawsuit has been a lag on RBS demand today and has forced those investors who want to invest in banks to look away from RBS and onto the other major banks like Barclays and HSBC."