Antofagasta Share Spreads Higher on Chinese PMI Data
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 24 October 2011: 11.00am Update
The FTSE 100 climbed in early trading following a resurgence in Chinese manufacturing for October, although it fell back later in the morning after Eurozone data showed a further contraction in activity for the region
By 10.45am (London time), the FTSE 100 was up 0.48% at 5515.22, while the FTSE 250 was also 0.48% higher at 10,314.99.
China manufacturing activity rebounds in October
Our friends in the Eurozone may have provided much heat but little light over the weekend, but traders found a reason to push shares higher this morning, as Chinese manufacturing data pointed to a slight rebound in activity in the world's second-largest economy.
The primary index of manufacturing, the flash PMI, moved back into expansion territory in October, moving up to 51.1 from the September reading of 49.9. This helped to reassure those that were beginning to fear a general slowdown that would imperil global growth.
There was also more positive news out of Asia, with Japanese exports rising 2.4% year-on-year in September. Although this was down on the August figure of 2.8%, it was significantly ahead of the 1% growth forecast by economists.
The data prompted a strong rally in mining shares, lifting the FTSE 100 back above the 5500 level for the first time since early August. Antofagasta, Fresnillo and Rio Tinto all put on strong gains.
But Eurozone PMIs shrink
However, the gains were knocked back after the first hour following a slew of Eurozone PMI readings for October. The Eurozone composite, services and manufacturing PMIs all dropped further into contraction territory (ie below 50).
In a worrying development, the German manufacturing sector also contracted during October, a fact that should send a shiver down all those expecting the German economy to bear the burden of keeping the European economy going.
The sole bright spot was that activity in the German services sector increased, with this index clawing its way from 49.7 to 52.1, a far bigger rise than had been expected.
No new progress from EU summit
Behind all this lies the continuing drama in the Eurozone. The weekend summit finished without much of real note, with the two key players, Chancellor Merkel and President Sarkozy saying that the outline of a deal has been agreed.
Some of the tensions can be gauged by the emergence of a public spat between Mr Sarkozy and David Cameron, with the French leader effectively advising the British prime minister to stop ordering the Eurozone around.
The points agreed in principle over the weekend include new fundraising by European banks to help protect them against losses on Eurozone debt, an increase in the firepower of the rescue fund (although how this is to be achieved is unclear) and lenders to Greece will be pushed into accepting losses higher than the 21% laid down in the July summit.
It is this last point that provides worry for markets. The last attempt to force bondholders to accept higher losses triggered a financial spread betting market rout, since losses above 40% could trigger credit default swaps.
Added to this is the problem that the ECB wants participation in restructuring to be voluntary, rather than by compulsion. I suspect that a 'voluntary' restructuring will be hard to achieve if leaders opt for the 50-60% losses favoured by the IMF and the EU.
US pre-market
At present, US futures are up 0.22% for the Dow and just 0.03% higher for the S&P 500. The sole piece of US economic data out today is the activity index from the Chicago Fed. The September reading is expected to edge up slightly to -0.31 from -0.43.
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The above comments do not constitute investment advice and neither IG Index nor SpreadBets.org.uk accept any responsibility for any use that may be made of them.
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"Antofagasta Share Spreads Higher on Chinese PMI Data" last update by AG, 24-Oct-2011
Warning: Financial spread betting carries a high level of risk. You can lose more than your initial investment or stake. Financial spread betting may not be suitable for all investors. Only trade with money that you can afford to lose. Make sure you fully understand the risk involved. If necessary, seek independent financial advice.
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