Financial News

LONDON (ShareCast) - As quarters go the second three months of 2009 couldn't have been a bigger contrast to the first quarter for the FTSE100

After dropping 508 points in the first quarter of 2009 we have managed to recoup 323 points of that over the next three months. However, despite this rally we are still below the opening values of this year.

The main sectors that have led the rebound are the same ones that fell the most; however it is important to note that this quarter has been the first strongly positive one since April to June 2007, so some sort of rebound was well overdue.

The key FTSE sectors that have fronted this rally over the last three months are Industrial Metals - up 84%, Automobiles and Parts - up 73% and Forestry and Paper - up 34%. What is surprising here is the fact that none of these three sectors have a single FTSE100 stock in them.

The best performing FTSE100 sector was Banking, up just over 30%, followed by Life Insurance (LINS.PK - news) , which also had a turbulent quarter. The mining sector was well back - up 19%, despite having five of the top 10 best performing blue chip stocks.

Best performer of the quarter was Vedanta Resources (LSE: VED.L - news) , up 103%, followed by Barclays (LSE: BARC.L - news) , up 83% and then Kazakhmys (LSE: KAZ.L - news) , up 67%.

It is noticeable that this rally has been driven by the same comanies that led the declines, with defensive plays performing pretty poorly despite good dividend yields. For example, Vodafone (LSE: VOD.L - news) despite a healthy dividend was down 7%, while companies like Glaxo, despite the swine flu outbreak only gained 0.75%. Utilities like National Grid (LSE: NG.L - news) , United Utilities (LSE: GB0006462336.L - news) and Centrica (LSE: CNA.L - news) had mixed performance over the quarter, despite being highly rated by various analysts and brokers.

The rally of the last quarter has been predominantly driven by profit-taking on bank shares, and also re-stocking because of low commodity prices after the crash of last year. Commodity prices have rallied significantly and this has buoyed miners in particular.

The concern remains with all the talk of green shoots is that this rally will tread water and retreat back in the face of rising unemployment and concern that future earnings forecasts could be a touch on the high side.

With US earnings for Q2 due out this month, it could well be that this rally could be a good old fashioned bull trap.

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