ASX 200 Spread Betting Market Builds on Late US Surge
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 10 August 2011: 11.30am Update
UK markets staged a rebound this morning, while volatility subsided after an exciting few days, as investors moved tentatively back into equities following the Fed's announcement that it would keep US rates on hold for an even more extended period.
By 11.15am (London time), the FTSE 100 was up 0.8% at 5206.02, while the UK-focused FTSE 250 surged 1.7% to 10259.53.
Fed stabilises markets for now
For the moment, the Fed seems to have injected some much-needed confidence into global markets. Last night the US central bank issued its latest statement on the economy, in the process attempting to look as if it wasn't reacting desperately to the recent violent swings in stock markets.
The statement said that the Fed would keep interest rates at 'exceptionally low levels' until mid-2013, and that it would continue to assess the economic outlook and apply policy tools as appropriate.
Stock markets enjoyed a rollercoaster ride following the statement's publication, at first falling rapidly since it did not explicitly mention QE3 as hoped, but then rising equally quickly as traders and financial spread betting investors calmed down and began to see indications that the Fed was indeed prepared to act as needed if the situation deteriorated.
Volatile times for the Swissy
The Swiss franc has fallen after the Swiss National Bank once again stirred itself into action. The bank expanded its liquidity operations, adding that it would take further steps as needed.
The Swiss currency surged on Tuesday after the Fed's statement, on expectations that the US dollar will weaken yet further in the era of loose monetary policy.
Safe-haven demand has been the driving factor in the USD/CHF spread betting market moves in the past two weeks, and last week's intervention by the financial authorities in Bern had only a temporary effect as panic gripped markets. Last week's meddling bought the Swiss about two days, so we will see how long the effects of this recent move last.
Banks and miners both rally
A weaker US dollar is boosting mining stocks today, along with resurgent hopes for the global economy.
The Fed's statement has reassured some people, for the moment anyway, that the US central bank is ready to intervene, thus helping to prop up growth in the world's largest economy.
More easy monetary policy also suggests that the commodity boom of recent months might have further to go, helping the revenues and profits of mining companies.
Vedanta Resources spiked 4% higher to 1366p, although it's still 45% down on the year, and BHP Billiton rose 2% to 1952p.
Some of the UK's big banks also staged a modest recovery this morning, after taking quite a beating in recent sessions. Lloyds and Barclays rose more than 3.5%, while RBS was up 2%.
Worries about a possible Eurozone apocalypse have eased of late, on news that the ECB is actively in the bond market buying the sovereign debt of Italy and Spain, but until we know how much the ECB will buy, and for how long, uncertainty will continue to dog the FTSE's big bank stocks.
US pre-market
US September futures are down 0.5%, suggesting some profit-taking might occur on Wall Street this afternoon in the aftermath of yesterday's big rally.
It's a fairly quiet day for economic data, with weekly mortgage data at midday and June job openings and wholesale inventories at 3pm (London time).
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 10 August 2011: 5.30am Update
In the US overnight, equity markets staged a huge rebound after another wild session.
Investors snapped up perceived bargains and the FOMC pledged to keep interest rates low for at least two more years.
The Nasdaq was the best performer - jumping 5.3% - while the S&P 500 and Dow Jones Industrial Average surged 4.7% and 4% respectively.
Asia & Australia
Across Asia, regional markets are all higher following the huge relief rally seen in US markets overnight. The short-covering rally was further boosted by comments from Federal Reserve Chairman Ben Bernanke that they would keep interest rates on hold for at least the next two years.
The Hang Seng is the best performer - up 3.2% - while the Shanghai Composite, Nikkei 225 and Kospi are all up between 0.7% and 1.9%.
In Australia, the ASX 200 is currently 2.6% firmer at 4139, just off its session highs of 4162. The late overnight surge on Wall Street has been enough of a catalyst to see spread betting investors resume their buying, which kicked off around noon yesterday with the Australian market now about 10.3% off its lows.
Gains for the day are broad-based with all major sector indices in positive territory. The biggest percentage advancers are the materials, energy and financial sectors which are all higher by more than 3%.
Europe
European equity markets are squaring up for a rebound after a strong rally on Wall Street in the last hour of trade yesterday. Some may have been expecting more from the Fed, but the commitment to keep interest rates on hold for the next two years was clearly sufficient to send a signal to buyers to get back into the game.
Granted, many portfolios will be looking badly bruised over the events of the last couple of weeks, but many will be hoping that this starts to draw a line under the rout, and that attention can shift back to rebuilding global economic growth.
The price of oil is certainly picking up once again, which underlines the air of confidence.
Another likely consequence of this is that the day-to-day economic releases will start to offer a little more direction, as opposed to the herd mentality of outright fear that we've been seeing of late.
German CPI and the BoE inflation report will both be high on the agenda for the next few hours, whilst there's still a steady stream of earnings news to come too.
One of the stand-outs here will be News Corp who will release at 4pm New York time, and who may use the occasion to unveil moves to placate investors in light of the recent phone hacking scandal in the UK.
Other high profile reports across Europe include Commerzbank, Nestle, Standard Life and GDF Suez, but all told we're looking at healthy gains at the start of Wednesday's trade.
Ahead of the open we're calling the FTSE up 42 at 5206, the DAX up 33 at 5950 and the CAC up 13 at 3189.
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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"ASX 200 Spread Betting Market Builds on Late US Surge" last update by AG, 10-Aug-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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