Can NMC Shares Recover

European markets saw minor gains following yesterday’s sharp falls as investors made tentative moves to buy back into heavily sold financial stocks whilst a long term Italian bond auction passed more smoothly than feared and a second reading of UK GDP was left unrevised.

The FTSE 100 rallied 7 points by 10.30am GMT whilst the DAX and CAC both traded with minor gains having opened higher. The Spanish IBEX index rallied 11pts with the Italian Mib gaining 10pts.

Eyes on Rome
Whilst eyes of investors in Europe focused on developments in Rome, a long term Italian bond auction swayed most attention in the morning session. The auction passed much better than expected with strong bid to cover ratio’s seeing the full €6.5bn targeted raised and yields rising less than had been feared. 10yr and 5yr bond yields rose to 4.83% and 3.59% respectively from 4.17% and 2.94% in a similar auction at the end of January. There had been fears the 10yr bond could see gross yields at or above the 5% mark.

In essence, whilst this is not a great Italian bond auction given the higher yields, it is certainly not as bad as had been feared and the strong coverage sends a signal that political gridlock has not dramatically affected investor confidence in the country just yet. That said, a prolonged state of political limbo or a minority government will have significant impacts on economic reform implementation and so it is wise not to take this bond auction as a vote of confidence in Rome.

Much now depends on how prospective coalition talks progresses with Bersani rejecting initial steps made by Berlusconi towards discussions. Speculation this morning that the Five Star Movement may be willing to entertain coalition talks with the centre left, having previously pledged to reject any coalition advances, is welcome news. Investors continue to watch developments in Rome closely.

UK GDP Unrevised
The Office of National Statistics kept UK GDP for the fourth quarter unrevised in a second reading with a contraction of -0.3%. A revision in the third and final reading cannot be disregarded however given the historical trend of revisions that have been seen to preliminary UK GDP readings. There was little market reaction to the release however.

ITV announces a special dividend
ITV shares fell 1% despite the company reporting another strong set of results and announced a special dividend of 4p or £156m. Adjusted earnings rose 13% to £520m with external revenues growing 3% to £2.2bn. Importantly, the numbers showed a continued diversification away from advertising reliant income, with non advertising revenues increasing by 12%. The firm also projected a 5% increase in advertising revenues for Q1. Shares have rallied 14% in 2013 already and so we have seen some small bouts of profit taking emerge this morning.