Australian ASX 200 Spread Betting Market Lower on Eurozone Woes
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 3 November 2011: 11.00am Update
European shares reversed their early morning losses on hopes that Greek Prime Minister George Papandreou will fail to survive his confidence vote tomorrow, potentially killing plans for a referendum on whether Greece remains in the Eurozone.
However, shares spread betting investors remain cautious as the possibility for Greece exiting the currency bloc remains very much alive.
By 10.30am (London time) the FTSE 100 was 0.31% higher, back above the psychological 5500 mark at 5501.18, while the broader FTSE 250 was 0.85% up at 10,339.06
Beginning of the end for Greece?
Had someone tried to tell me this time last week that Greece would leave the Eurozone, I would have found it hard to believe them. After all, European leaders had agreed on a 'plan'. But here we are...
After the emergency crisis meeting last night, Europe's leaders have decided to suspend an overdue tranche of €8 billion in international aid to Athens and demanded that Greece makes a clear decision on whether it wishes to leave the Eurozone.
Under strong pressure from French president Nicolas Sarkozy and German chancellor Angela Merkel, Mr Papandreou agreed to bring forward a planned referendum to 4 December. The referendum will now ask the Greek people if they wish to remain in the Eurozone, as opposed to if they want the €130 billion bailout.
I'm sure the answer to the former would be 'yes', while the latter would be 'no'. But Greece cannot have their cake and eat it too.
However, Mr Papandreou's strategy for an in-or-out referendum was undermined this morning by the Greek finance minister, Evangelos Venizelos, who said that Greece's position within the Eurozone is historic and cannot be put in doubt.
Eurogroup president Jean-Claude Juncker also made clear he did not want Greece to leave the Eurozone, but he announced that leaders have begun to work on a possible Greece exit, saying it was essential that other members of the currency union would not be damaged in such an event.
However, what's most likely on everyone's mind at the moment is what will happen to the Eurozone if Greece leaves? Who's next? Will Greece also leave the EU and will the bloc break up? French European affairs minister, Jean Leonetti, seems to believe that the Eurozone could survive even if Greece were forced out of the currency bloc.
As events in the Eurozone unfold, spread betting investors will watch out for the European Central Bank's policy decision later in the day, the first led by new president Mario Draghi.
Markets will be interested in anything Mr Draghi has to say about the ECB's programme of buying Eurozone sovereign bonds, as well as Greece's destiny in the Eurozone. They will also be wary of any comments out of the G20 summit, where the European debt crisis is likely to dominate talks.
Fed lowers growth forecasts
Market sentiment was slightly dampened by the US Federal Reserve after it cut its forecast for the world's largest economy last night. In a press statement the Fed chairman raised projections for unemployment, but (positively) surprised markets after he pledged to consider further easing measures to spur a struggling recovery.
Mr Bernanke also announced that there are significant downside risks to the economic outlook and that concerns about European fiscal and banking issues have contributed to strains in global financial markets. Members of the central bank's policy-setting panel voted 9-1 to hold a steady course and keep interest rates at their current level.
In fresh projections, the Fed lowered forecasts for growth and raised forecasts for unemployment for this year, 2012 and 2013. Policymakers do not see the jobless rate, now at 9.1%, falling to a level they consider consistent with full employment by the final quarter of 2014.
Unemployment is expected to remain above 8.5% by the end of 2012, while the economy is now expected to grow between 2.5% and 2.9% next year, down from the 3.3% to 3.7% they were expecting in June. Mr Bernanke's comments further reiterated that the US economic recovery remains anaemic, and could be knocked off course if Europe fails to quell its crisis.
US pre-market
US December futures are pointing to a higher open on Wall Street this afternoon. S&P 500 futures are currently up 0.22% to 1237.90, while Dow futures are 0.24% higher at 11,796.00.
Looking ahead to this afternoon, the US is due to release weekly jobless data at 12.30pm (London time), followed by ISM non-manufacturing figures and factory orders at 2pm (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 3 November 2011: 6.00am Update
Global markets rebounded overnight, after Fed chief Ben Bernanke said the Central Bank will use monetary tools if necessary to safeguard the economic recovery.
Mr Bernanke said purchases of mortgage-backed securities are a viable option to help the economy. With the economy showing some improvement, and the Fed ready to take action if necessary, risk was back in play. European leaders have also ramped up pressure on Greece to accept a bailout. EU officials have signalled further Greek bailout money is on hold.
Among the major averages, the Dow Jones Industrial Average surged 1.5% to end at 11836. The S&P advanced 1.6% to close at 1238 and the Nasdaq climbed 1.3% to finish at 2607.
Sentiment was also lifted by better-than-forecast October jobs data from payroll provider ADP. This number backs some of the more encouraging economic figures we have been getting from the US recently.
Asia & Australia
Across Asia, regional markets are weaker after European leaders cut off aid payments to Greece and said a referendum in five weeks will determine whether the debt-strapped nation becomes the first to exit the euro area.
The news has seen risk once again out of favour, and equity markets fall. The Hang Seng is down 1.8%, while the Kospi is 1.5% weaker. Elsewhere in the region, the Shanghai Composite is up 0.6% and the Nikkei is closed for a bank holiday.
Australia's S&P/ASX 200 index has defied a 1.5% gain on Wall Street to fall 0.3%, as spread betting investors remain cautious about Europe's debt woes. The market has extended its losses after France and Germany told Greece that a sixth tranche of aid won’t be paid unless the country adopts proposals outlined at last week’s summit.
Retail sales numbers released this morning came in line with expectations, but did little for the market.
Australian banks are more directly hurt by European issues as they fund much of their loan books with increasingly expensive offshore debt. ANZ reported a FY profit slightly below expectations, and its shares are down 0.9%, while Commonwealth Bank is 1% lower.
Miners are faring better on higher commodity prices, with BHP Billiton up 1% and Rio Tinto higher 0.6%. Newscorp is up 3% after posting some strong quarterly numbers.
Europe
Turning to the European session, we have a busy night ahead. While focus will remain firmly on negotiations between EU leaders and Greek government officials, investors will also be awaiting UK Services PMI data and a speech from BOE Governor Mervyn King.
Elsewhere, financial spread betting markets will also be eager to see if the ECB cuts rates at the first ECB meeting under new President Mario Draghi.
Ahead of the open, we are calling the FTSE down 54 points at 5430, the DAX down 93 points at 5873 and the CAC down 37 points at 3073.
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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"Australian ASX 200 Spread Betting Market Lower on Eurozone Woes" last update by AG, 03-Nov-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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