Asian Shares Struggle on Ratings Agency Eurozone Comments
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 14 December 2011: 10.30am Update
Fears that last week’s EU summit deal is coming apart combined with disappointment regarding last night’s Fed statement to send markets lower this morning. Although financial spread betting investors are not yet rushing for safe havens, the overall atmosphere remains cautious.
By 10.30am (London time), both the FTSE 100 and its UK-focused companion, the FTSE 250, were down 0.58% at 5458.44 and 9903.09 respectively.
Eurozone deal looking shaky
It seems that the wheels are already coming off the EU summit deal, and not even a week has passed since the end of the meeting. Both Eurozone and non-Eurozone countries are beginning to raise questions about the validity of the deal, with the need for parliamentary approval being the most important objection.
The Czech Republic, probably the most eurosceptic nation after Britain, said that it was unwise to sign a ‘blank sheet of paper’, given that changes might still be made to the agreement, while Hungary is unwilling to give up control over some elements of its national taxation policy.
There are even rumblings inside the Eurozone family, with opposition parties in Ireland and the Netherlands calling on their governments to hold referenda – which the governments would almost certainly lose.
France and Germany might hope that the treaty will survive unscathed, but indices spread betting markets will start fretting about amendments that will undermine confidence in what little progress has been made so far in saving the euro.
Speaking of changes, the Italian government appears to be under pressure to make changes to its austerity package. Prime Minister Mario Monti may have designated his plan the ‘save Italy’ package, but he’s decided to raise the inflation-link for pensions in order to lessen the burden on poorer pensioners.
In addition, Mr Monti is scrapping a homeowner’s tax on low income families, choosing instead to implement a tax on foreign properties and on pensions over €200,000. I thought that the whole point of installing a technocratic government without a democratic mandate was that austerity measures could be implemented without worrying about alienating voters?
Fed provides little comfort
Last night, I warned that the Federal Reserve might disappoint investors, and US markets duly dropped following the announcement that the US central bank would not be loosening policy.
The Fed said that the US economy was doing slightly better, but it added that the Eurozone crisis had exacerbated the downside risks to America’s recovery, and so it opted to keep policy unchanged.
It was always unlikely that the committee would fire up the printing presses again, but the change in voting makeup in 2012 will doubtless encourage markets to hope that the Fed will step in with more free money at some point in the New Year.
Supergroup back on form
Trader’s darling Supergroup is back on the up this morning, as the tumultuous ride in its share price continues. Shares in the company raced 10% higher to 554p, taking the company back above its 500p flotation price, after it said that like-for-like pre-tax profit for the half year was up from £14.6 million to £20.3 million.
Supergroup said that it had resolved warehouse issues, and that it was well-placed to benefit from the busy Christmas trading period.
US pre-market
It’s a quiet day for US economic data, with only weekly mortgage data and then November import prices out, at midday and 1.30pm (London time) respectively. US futures are slightly higher, with the Dow up 9 points and the S&P 500 3.6 points higher.
Remember that financial spread betting is a leveraged product and can result in losses that exceed your initial deposit. Spread betting may not be suitable for everyone, so please ensure that you fully understand the risks involved.
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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Spread Betting 14 December 2011: 5.00am Update
US markets got off to a strong start after German investor confidence grew and Spain’s debt auctions impressed.
Markets were also anticipating some indication of more quantitative easing from the Fed ahead of its statement. Sentiment switched quickly after the Fed refrained from signalling further quantitative easing or further coordinated action with the ECB. There were also reports that German Chancellor Angela Merkel rejected boosting Europe’s permanent bailout fund.
Among the major averages, the Dow Jones Industrial Average lost 0.6% to 11,955. The S&P declined 0.9% to 1226 and the NASDAQ shed 1.3% to 2579. In Europe, the FTSE bucked the trend, finishing the session up 1.2% as oil and gas shares surged.
Asia & Australia
Across Asia, regional markets are mixed after a sluggish open on the back of declines in US trade. US markets retreated into the close after the Fed refrained from signalling further quantitative easing or further coordinated action with the ECB.
However, markets in the region are off their lows, with the ASX 200 now trading in positive territory. The Aussie market is up 0.2%, the Nikkei is down 0.6%, while the Hang Seng and Shanghai Composite are relatively flat.
Australia's S&P/ASX 200 is up at 4200 after hitting a nine-day low of 4168.7. Resources are the weakest performers, with mining heavyweight BHP Billiton down 0.3%. Some of the major resource companies have turned positive, however, with Rio Tinto up 0.8% after a successful arbitration against Ivanhoe Mines.
The big banks are now mostly higher with ANZ leading the charge (+1.5%), but Westpac is struggling after some fairly negative trading comments at its AGM. Some of the defensive sectors are holding up well, with healthcare stocks notable gainers today.
The Westpac consumer sentiment reading for December fell 8.3% after a 6.3% rise in November. Clearly the rate cut wasn’t so great after all.
Europe
Due to a split in performances between US and European markets overnight, the opening calls for the two regions are pointing in opposite directions.
European markets are pointing towards a weaker open after a fairly resilient session prior to the FOMC statement, while US markets are pointing towards modest gains after having been sharply sold off into the close following the FOMC statement.
Overnight, ongoing scepticism of the weekend’s EU summit resolutions and a sense of hopelessness that the European crisis will drag on well into 2012 saw the euro breach key support levels and fall to its lowest figure since January.
Spread betting investors’ hopes for a risk-infused rally into Christmas dissipated shortly after the summit, with volumes across the board falling dramatically as many traders have essentially ‘shut up shop’ for the year.
Risk positions have been wound back and money is being parked in the relative safety of the USD and US treasuries. It is difficult to see this trend materially changing between now and the end of the year.
Ahead of a potential S&P downgrade for some of the euro-nations, we are seeing a ‘sell the rumour, buy the fact’ approach by investors. Although many say this is already priced in, traders do not want to be caught out should there be a significant reaction.
There is a lot of economic data to look out for in the UK tonight with claimant count change, unemployment rate and average earnings index figures due out. The claimant count change is expected at 16.1k whilst the unemployment rate is expected to rise to 8.4% (from 8.3%).
Ahead of the European open we're calling the FTSE down 34 at 5456, the DAX down 33 at 5741 and the CAC down 20 at 3059.
Remember that financial spread betting is a leveraged product and can result in losses that exceed your initial deposit. Spread betting may not be suitable for everyone, so please ensure that you fully understand the risks involved.
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.
Advert:
IG Index Spread Betting - No Fees, No Commissions, Free Charts and Live Prices.
Spread Bet on Indices, Forex, Commodities, Shares and more. For details see IG Index.
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"Asian Shares Struggle on Ratings Agency Eurozone Comments" last update by AG, 14-Dec-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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