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FTSE back near 3-month high as ECB worries fade

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03/08/2012
The FTSE 100 has added 1.4% in early trading as investors consign yesterday’s ECB disappointment to the past and await today’s US jobs data.

London’s blue chip index stood at 5,740 shortly before midday, a rise of 1.4% and close to the 3-month high of 5,766 seen prior to European Central Bank president Mario Draghi’s press conference yesterday.

France’s CAC 40 rose 1.9% to 3,293 and the German Dax was up 1.7% to 6,715 as European financials also reversed yesterday’s falls.

Draghi’s comments, which hinted at future bond buying action from the ECB but were short on specifics, sparked a sell off in equities and peripheral bonds yesterday, with Spanish 10-year yields seeing their largest one-day rise in 18 years.

Having reached 7.3% yesterday, however, Spanish 10-year yields moved back below 7% by late morning today as investors seemingly reconsidered the impact of Draghi’s comments.

Short-dated bond yields for Spain and Italy also declined after yesterday’s spike.

At 3.75%, Spanish two-year yields stand around 200bps lower than the levels seen prior to Draghi’s 25 July statement that the ECB would do “whatever it takes” to save the euro.

In London, RBS’s interim loss of £1.5bn did not prevent investors snapping up the shares, the bank leading the list of FTSE risers with a 5.2% jump to 215p.

Fellow financials Aviva and Barclays were also among the day’s largest gainers, rising 4.8% and 4.3% to 298.8p and 169.3p respectively.

Futures also pointed to an erasing of yesterday’s 0.7% fall in the S&P 500, with investors now looking to today’s US employment figures as the next key datapoint.

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