AstraZeneca Shares Spreads Slip After R&D Impairment Charge
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 20 December 2011: 12.00pm Update
European equities climbed this morning, ending a two-week slide after German data showed a sharp rise in business sentiment and as the Eurozone agreed to boost its lending to the IMF in an effort to stem the debt crisis.
By 11am (London time) the FTSE 100 reversed earlier gains and was down 0.18% at 5354.36, while the broader FTSE 250 was 0.07% higher at 9755.17. Meanwhile, stocks in continental Europe had jumped over 1%.
Eurozone agrees to boost IMF resources
Following a three-hour conference call between EU finance ministers last night, Eurozone ministers announced that they had finally agreed to boost IMF resources by €150 billion in, what seems to be becoming, a desperate attempt to stem the debt crisis.
The call also achieved gathering support for more money from EU allies. The Czech Republic, Denmark, Poland and Sweden said that they would grant loans to the IMF to help save the debt-laden zone, though parliamentary approval will be required.
Following the conference, a statement was released which said that the EU would welcome G20 members and other financially strong IMF members to support the efforts to preserve global financial stability by contributing to the increase in IMF resources.
Meanwhile, ECB president Mario Draghi was speaking at a testimony to the European parliament. Mr Draghi praised EU efforts for a new fiscal agreement and said it was a solid base for responding to the crisis, while calling the euro an ‘irreversible’ project.
The statement contradicts last week’s taboo comments after he warned of a Eurozone breakup, but nonetheless was comforting for market players.
Separately, German economic data showed that business sentiment rose sharply in December, defying expectations for a decline and underscoring the strength of Europe's biggest economy. The business climate index increased to 107.2 in December from 106.6 in November.
AstraZeneca shares hit by drug pipeline disruptions
Pharmaceuticals company AstraZeneca announced this morning that it will take a $381.5 million pre-tax charge due to R&D impairment in the fourth quarter, following a double blow to its new drug pipeline.
The company announced that its cancer drug, Olaparib, will not progress into the final phase of testing for ovarian cancer due to disappointing results in a mid-stage clinical trial. In addition an experimental anti-depressant failed to meet its goal in a second final phase study.
The bad news also undermines confidence in AstraZeneca's ability to renew its business in the face of declining sales of existing medicines.
Though despite the R&D impairment charges, AstraZeneca still expects to hit its target for 2011 earnings. But it said its core earnings per share, which exclude certain items, would now be in the lower half of the previously indicated range of $7.20 to $7.40.
Shares in AstraZeneca fell 3% this morning to a low of 2851.5p.
Looking ahead
Wall Street finished over 1% lower yesterday after Bank of America's share price fell below $5 for the first time in nearly three years.
However, for today, US March futures point to a higher open this afternoon, with S&P 500 contracts up 1.03% to 1211.40, while those for the Dow are 0.8% higher at 11,797.00.
Once again, developments from the Eurozone will likely dominate trading on Wall Street, as on the economic data front it will be a fairly quiet day in the US.
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 20 December 2011: 5.00am Update
US markets were weaker overnight after ECB President Mario Draghi said significant risks to the European economy remain, while also ruling out ECB bond purchases to prevent sovereign debt defaults.
News that euro-currency members agreed to provide an additional €150 billion to the IMF made no mention of contributions by some key EU members, which saw markets extend their losses. However, the relatively steady Eurozone debt markets helped to prevent a sell-off similar to that seen in the Asian session.
Among the major averages, the Dow Jones Industrial Average dropped 0.8% to close at 11,766. The S&P shed 1.2% to 1205 and the NASDAQ was down 1.3% to 2523.
Financial shares were the biggest losers in US stock markets, as regulations and increased capital requirements are expected to negatively impact performance and margins.
Asia & Australia
Across Asia, regional markets are stronger despite relatively weak leads from US and European markets.
The region was sold off significantly in the Asian session yesterday, and it seems investors feel the sell-off was slightly overdone following the news of Kim Jong Il’s death.
The Kospi is leading the gains in the region with a 0.7% increase whilst the Nikkei, Hang Seng and Shanghai Composite are up around half a percent each. Australia’s ASX 200 is lagging the region with a 0.1% gain.
The Australian market has risen today as investors shrug off Draghi’s comments. Defensive sectors are leading the gains in a fairly subdued day session, with telecoms and healthcare stocks outperforming. Some of the energy stocks have been supported by gains in oil prices overnight, with Woodside Petroleum and Santos both higher.
The banks are mostly rallying with Westpac and Commonwealth Bank leading the way. Billabong has continued to struggle after yesterday’s profit warning, but it is off its lows in the afternoon session.
Macmahon Holdings is one of the best performers of the day, climbing 5% after an earnings upgrade. The stock might start to receive some broker upgrades following the news. The RBA’s monetary policy minutes released this morning temporarily lifted sentiment, only to wane in the afternoon session.
Europe
Following the recovery we have seen in the Asian session, US markets are now pointing towards modest gains on the open. European markets, however, are facing modest losses on the open as they outperformed other regions yesterday and avoided a sell-off.
Investors will continue to assess the likely impact of the ECB’s Long Term Refinancing Operations (LTROs) commencing this week, which will allow banks to borrow unlimited amounts of money from the ECB at a rate of 1% for a term of 3 years.
It is hoped that this will greatly reduce the refinancing burden of banks, which have in excess of €200 billion of debt to rollover in 2012. The take-up of this ‘lending’ offer by the banks will be a crucial driver of sentiment for the EUR / USD spread betting market over the coming weeks.
With ‘European fatigue’ now having engulfed the market, investors are treading cautiously when it comes to their exposure to risk assets and risk currencies.
This is likely to persist until markets have greater confidence in both banks and sovereign nations to engineer a successful deleveraging of their balance sheets.
There is no major economic data due out of the UK tonight with CBI realised sales the only event on the calendar. Ahead of the European open we're calling the FTSE down 13 at 5352, the DAX down 14 at 5657 and the CAC down 6 at 2968.
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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"AstraZeneca Shares Spreads Slip After R&D Impairment Charge" last update by AG, 20-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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