LONDON (Alliance News) - European stocks are enjoying a mini relief rally Tuesday after Middle East tensions eased a overnight following a proposal from Russia that Syria surrender its stockpile of chemical weapons to avoid a military strike by the US.
The proposal from Russia was welcomed by US President Barack Obama as "certainly a positive development", and quickly accepted by Syria. However, the Obama said he remains sceptical of the idea given the Syrian regime's track records and points out that it would only happen if Syria believed a military strike was still an option. The development comes as Obama is expected to address the American people in a speech Tuesday in an attempt to drum up support for military action. He is said to be undecided whether to proceed with a strike even if lawmakers in Congress, where support seems weak, turn him down.
By mid-morning, the FTSE 100 is up 0.8% at 6,583, the FTSE 250 is up 1.2% at 15,274, and the AIM All-Share is up 0.5% at 772.
Most blue chips are trading higher on the positive diplomatic developments on Syria. As heavy fuel users, airlines are gaining the most as the price of oil continued to soften overnight. International Consolidated Airlines is leading the FTSE 100 gainers, up 4.3%, with easyJet close behind, up 3.8%.
The UK house price index from the Royal Institute of Chartered Surveyors showed an increase to 40 in August, from a revised reading of 37 in July, while the index of new buyer enquiries rose to 66, from 54 previously, now at the highest level since the index began in 1999. With supply outstripping supply, more house price inflation looks likely in the coming months.
While this may be worrying for the wider economy, with growth based on low-wage growth and high debt, it's good for house builders, banks and retailers, says Shore Capital Stock Brokers. Indeed, Real Estate Investment Trusts are so far having a good day. Having recently suffered against rising gilt yields, REITS are posting gains on the house price statistics, currently up 1.7%.
The gold price continues to soften on the positive diplomatic developments on Syria, currently at USD1,374.9 per oz, while a quiet day so for on the forex market sees the pound hold above 1.57 to the dollar, while the euro is close to flat against other majors.
Still to come Tuesday, a UK 30-year bond auction later this morning will provide a reading on the appetite for UK debt, and the US redbook index at 1255 BST will give the latest sentiment in US retail sales.
By Jon Darby; jondarby@alliancenews.com; @jondarby100
Copyright 2013 Alliance News Limited. All Rights Reserved.
International Airlines (IAG)
easyJet (EZJ)