Optimism returns after US debt deal

The prospect of a US debt deal has given European indices a lift today, with the German DAX challenging its all-time high in early trade. The increased inflows to European equities are evident.

The FTSE 100 is also performing well, led by international service company Serco, which has gained 3.2% on the back of a broker upgrade. Optimism and appetite for risk are back with a bang, with the financial and basic materials sectors both benefitting from the US government's negotiation progress.

Anglo American is also gaining, on news that operations in South Africa have been reinstated as the striking miners return to work. The shares have pushed up by 2.5%.

The real action today has been centred on one of the most widely anticipated share placements in recent memory. Given that Royal Mail shares opened sharply higher by an astonishing 36% this morning, one can only say that investors have clearly given their stamp of approval to the offering. Within the first hour of trading 100 million shares have been traded, which adds up to 10% of the issue. The highest price of 456p reached in the first few minutes of trading indicates that the market capitalisation of the company is approximately a billion more than the government's initial valuation. As it stands, this would effectively make the Royal Mail eligible for a FTSE100 listing. Whether this pricing can be sustained remains to be seen, and one could expect to see more clarity when the shares are listed officially next Tuesday.

Consumer sentiment in the US should be an interesting statistic to watch today, in light of the recent Washington shenanigans. The index is expected to slip back slightly to 77.2 from last month’s 77.5. The Dow, having gained an amazing 323 points yesterday, is expected to open around 12 points lower at 15,114.

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