Tuesday 21 October 2014

European shares higher ahead of Yellen

Published 11/02/2014 | 09:33

Stock market analysis
Stock market analysis

European shares gained in early deals on Tuesday, led up by good news on the earnings front from L'Oreal as investors looked to the new US Federal Reserve chair to reassure markets over policy.

L'Oreal's gained 2.5pc, the top FTSEurofirst 300 riser, after it said it would buy 8pc of its capital for €6.5bn from Swiss consumer goods group Nestle, boosting the French cosmetics group's earnings per share by more than 5 percent.

The French firm also saw underlying sales growth improve more than expected in the fourth quarter.

The pan-European FTSEurofirst 300 was up 0.4pc at 1,306.23 in early trade.

The broader market was supported along with other global equity markets by hopes that new Fed head Janet Yellen would strike a reassuring tone when she testified in front of Congress later in the day.

While she is not expected to signal any deviation from the "tapering" of equity-friendly asset purchases, she may indicate that the Fed's forward guidance of low rates needs tweaking, given that the unemployment rate is near the central bank's target well before the Fed is inclined to raise rates again.

"The rapid decline in the unemployment rate now sees it hovering just above the Fed's target level... However, the main reason for this has been people dropping out of the labour force," Jonathan Sudaria, trader at London Capital Group, said in a note.

"Bulls may be looking for some sort of 're-phrasing' or even lowering of the threshold to bring it more into line with the real economy."

 

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