Aussie Spread Betting Market Higher on Optimism over EFSF
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 28 October 2011: 11.00am Update
The FTSE 100 eased off the accelerator this morning following yesterday's impressive gains, but the leading index is still on course for its best monthly gain since 1990.
Questions are beginning to surface about the implementation of this week's Eurozone deal, and this might act as a dampener on sentiment. By 10.55pm (London time), the FTSE 100 was up 0.36% at 5734.46, while the FTSE 250 was up 0.3% at 10,766.24.
Realism starts to take hold
A bout of profit-taking and some lessening of yesterday's euphoria were only to be expected, although the FTSE 100 made a valiant attempt to continue the rally into a second day. Now that the initial excitement is over, traders are beginning to question what has actually changed since Wednesday night.
US markets put on further gains after reports emerged that suggested China was willing to stump up some cash to help the ailing single currency.
However, there was some selling after French president Nicholas Sarkozy said that Greece should not have been allowed to join the euro in the first place, but that it would eventually emerge from the crisis, as Europe had 'no other choice' but to help Athens to succeed.
After a day or more to reflect on the deal, the key questions are beginning to emerge. Of particular worry is the nature of the 50% haircut on Greek bonds. This involves the arcane world of bonds and bond traders, and there is still plenty of room for disagreement on a bond swap programme that must be finished by early January 2012.
The long hard work of fleshing out Thursday morning's agreement now begins, and spread betting investors should be prepared for signs of disagreement that could disrupt the current rally in global markets.
Portugal economy fears
There are also worrying signs that Portugal may be entering a Greek-style tailspin. Real M1 deposits, cash and current accounts held by ordinary people, contracted at an annualised rate of 21% over the past six months, a similar pattern to that seen in Greece before its economic position became untenable.
The M1 figure is closely watched as it is considered a leading indicator, providing clues as to the health of an economy six months to a year ahead.
A shrinking money supply bodes ill for an economy with a high debt level (like Portugal), and when combined with the tightening imposed by the EU/IMF bailout, raises the possibility that Portugal will become as dependent as Greece on outside help. Outside events may yet derail this week's progress.
Banking stocks are still fairly resilient this morning, after their stellar gains yesterday. Only Lloyds was in the red, and that was only by 0.03% at 37.06p. HSBC was the biggest gainer, up 3.2% at 573.1p. Mining stocks however succumbed to profit taking, although gold miners remained fairly immune.
WPP still expects continued growth
Advertising firm WPP rose 1.3% to 686p as investors bought the shares following an upbeat trading update. Strong growth in emerging markets offset weakness in North America, with revenues up 9% to £2.46 billion.
Encouragingly, WPP said that it had seen little impact on revenues from the eurozone crisis or from slowing global growth, with investment remaining stable in developed markets and still expanding in growth markets.
US pre-market
US futures are down 0.23% for the Dow and 0.37% for the S&P 500, suggesting that some consolidation may occur following the opening bell. US personal income and consumption data is published at 1.30pm (London time), with the Michigan confidence revision published at 2.55pm (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 28 October 2011: 6.00am Update
Global markets rallied overnight as French President Nicolas Sarkozy said that the euro region’s bailout fund will be leveraged by four to five times, and the banks agreed to a voluntary writedown of 50% on Greek debt.
Europe will also seek assistance from China in the bailout effort. The news sent the S&P 500 back into positive territory for 2011, with the banks leading the charge.
In economic news, US GDP grew 2.5% in the third quarter. With the world’s largest economy expanding at its fastest pace in a year and a positive outcome from Europe, there was little in the way of the bulls last night. Risk assets were snapped up in a buying frenzy throughout Asian, European and US trading.
Among the major averages, the Dow Jones Industrial Average advanced 2.9% to end at 12209, the S&P climbed 3.4% to 1285, while the Nasdaq jumped 3.3% to 2739. We had already seen a monster rally in Europe, with the CAC soaring 6.3% and the DAX surging 5.4%.
Asia & Australia
Across Asia, regional markets are flying, extending yesterday’s gains, as European leaders achieved enough to wipe away any chance of systemic risk in the short-term. Yesterday’s announcement of a plan to deal with Greek debt and boost the firepower of the Eurozone bailout fund by European leaders appeased the bulls.
The financials have been notably buoyant across the region, with gains for big names like Nomura, Mitsubishi Financial Group and Macquarie Group. The Hang Seng is leading, with a 2.1% advance. Elsewhere in the region, the Shanghai Composite is up 1.6% and the Nikkei 1.4% higher.
The Aussie spread betting market is up 0.1% at 4352 after hitting a three-month high of 4417.6 on the back of offshore markets reacting positively to the European financial stability plan.
The index has significantly pulled back from the highs, pressured by weakness in some of the defensive sectors. Financials are the best performers, with major banks all in positive territory.
Macquarie Group is up 4.8% after a 10% buy-back announcement offset a first-half earnings miss, plus a fiscal 2012 profit warning. Materials are also overperforming, with BHP Billiton up 0.7% and Rio Tinto advancing 0.4% after LME copper rose 6.1%.
Risk assets are performing well across the board. The defensive sectors are struggling, with telecoms, healthcare and utilities all in the red.
Europe
There's no sign of a let up in the abundant confidence of traders following the outcome of the European summit leaders' meeting earlier in the week. The Dow closed carrying a 300+ point gain yesterday, Asian markets have followed this lead and the expectations are for the major European indices to jump higher once again at the open too.
However, there's still the debate as to just how comprehensive this current plan is and certainly any further stumbles along the path to economic recovery would reignite worries over the future of the single currency.
For the meantime, however, the euro is finding no end of support as well, with EUR/USD spreads having pushed out as far as 1.4200 overnight – territory not seen since the start of September.
Bank stocks can expect to be under scrutiny today to see if they can hold onto those bumper gains, whilst earnings season continues apace on Wall Street too. Chevron, Whirlpool and Merck all highlight here, and Total is expected to report in Paris.
The economic calendar is looking rather quiet with University of Michigan sentiment data likely to dominate here, but with the next chapter of the Eurozone crisis now in play, the big question is whether traders can hold onto this confidence and not get spooked at the month end.
Ahead of the open we're calling the FTSE up 19 at 5733, the DAX up 61 at 6399 and the CAC up 24 at 3393.
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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"Aussie Spread Betting Market Higher on Optimism over EFSF" last update by AG, 28-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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