Australian Indices See Losses After European Bourses Rout
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 6 September 2011: 11.00am Update
The FTSE 100 bounced back this morning as investors nervously tip-toed back into the market looking for a bargain, following broadly upbeat comments from EU Commission president Jose Manuel Barroso, saying that EU leaders are committed to solve the crisis.
Likely to cap gains today are persistent concerns that the developed world is slipping back into recession, which saw gold for December delivery reach a record high of $1923.7 an ounce as commodities spread betting investors continue to seek comfort in perceived safe havens.
The FTSE 100 jumped over 1.5% this morning to 5190.27, while the broader FTSE 250 was up almost 1% to 10,196.16 by 10.30am (London time).
Global leaders broadly upbeat about global economy
EU Commission president Jose Manuel Barroso helped to boost investor confidence this morning by defending the political will of EU leaders to resolve the Eurozone debt crisis, despite concerns that they seem unable to halt a slide back into recession and avoid a fresh banking crisis.
In a conference today in Australia, he expressed confidence that European leaders will be able to solve the crisis, however fiscal consolidation was Europe's most serious challenge. He said the euro remained a stable and credible currency, and leaders would do whatever was needed to ensure financial stability in the Eurozone.
Further comments today supporting the state of the global economy were from World Bank president Robert Zoellick. This morning he reiterated that he did not believe that the US or the global economy is likely to fall back into recession, however there are risks.
He stated that the US is more likely to go through a period of slow growth with ongoing high unemployment. On Europe, he said the EU had to consider working closer in the area of fiscal policy to address the problems facing its members. Mr Zoellick’s comments add pressure to European officials who have yet to contain a sovereign debt crisis.
Swiss National Bank threatens to intervene
The euro soared versus the Swiss franc this morning after the Swiss National Bank (SNB) announced that it would no longer tolerate the shared currency trading below 1.20 Swiss francs. The euro jumped from a morning low of 1.1038 to 1.2153, a gain of nearly 10%, after the SNB released its statement.
The SNB said that it was aiming for a substantial and sustained weakening of the Swiss franc, as the current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development.
The SNB said it will ‘enforce this minimum rate with the utmost determination’ and is prepared to buy foreign currency in unlimited quantities.
More economic data, more disappointment
UK data released this morning adds to a recent string of dire news on the state of the struggling economy.
Retail sales fell 0.6% at an annual rate in August as cash-strapped consumers bought fewer non-essential items such as homeware or furniture.
The food sector proved more resilient but non-food retail showed a marked decrease in sales year-on-year. Poor consumer confidence, high inflation and the on-going squeeze on personal finances remain the biggest threats to the retail sector.
In a separate report released this morning, data showed that a preliminary reading for second-quarter GDP in Europe came in as expected, with the bloc growing a meagre 0.2% compared to 0.8% the previous quarter.
US pre-market
US September futures pointed to a lower open on Wall Street this afternoon as the US market prepared itself to play ‘catch-up’ after being closed yesterday for their Labor Day holiday. By 10.30am (London time), S&P 500 futures were 1.4% lower at 1153.20, while the Dow Jones futures were down 1% to 11,095.00.
This afternoon at 3pm (London time), financial spread betting markets will pay close attention to the US ISM non-manufacturing index for August, which is forecast to come in at 51.3 compared to 52.7 for July.
At 6.10pm (London time), the Minneapolis Fed president (who hovers between hawkish and dovish views on monetary policy) could provide more clarity on the current Fed opinion over the economy during his scheduled speech.
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 6 September 2011: 6.00am Update
Across Asia, regional markets are all under pressure following the huge falls seen in European markets overnight, in the absence of US trade.
Falls among equities seem limited at the moment, but further downside will hinge on what happens in Europe this evening, and how US futures react to the panic. The Nikkei 225 is the worst performer - down 1.2% - while the Hang Seng is 1% lower. In China, the Shanghai Composite is only 0.4% softer.
Australia
In Australia, the ASX 200 is currently 1.5% weaker at 4080, having earlier traded as low as 4072.
As expected after the rout on European bourses overnight, the Australia market is seeing broad-based losses, with indices spread betting investors becoming increasingly concerned that European/US policy makers just can’t seem to find - or agree on - any sort of solution to their multitude of problems.
With risk aversion the obvious theme of the day, we are seeing the energy, industrials, consumer discretionary and materials sectors among the worst performers on the session. As expected, the RBA kept its cash rate on hold at 4.75%, and provided what could best be described as a neutral statement.
Labor Day in the US traditionally marks the end of summer, signalling that it's time to get back to business for many. This year, however, it's certainly looking like it's going to be a torrid start on Wall Street as traders try to play catch up after the long weekend.
Persistent worries
These persistent Eurozone worries are back in play once again amidst signs that austerity measures may be faltering, whilst last Friday's disappointing non-farm payrolls continue to leave the markets with something of a hangover.
Asian stocks have broadly been under pressure over the last few hours as well, and the financial stocks are still taking the heat off that FHFA lawsuit. So it's all now painting a rather bleak picture for Europe at the open.
Once again, expect calls to mount in the near term for bargain hunters to start dipping their toes back in, but it may take some meaningful news on the Eurozone situation to find much hope of any stability.
Economic news remains rather thin on the ground, with Q2 GDP from the Eurozone one of the few highlights on the agenda. Earnings news is looking relatively low-key too, so it's all going to come down to sentiment. Right now that remains pretty lacklustre.
Ahead of the open we're calling the FTSE down 48 at 5055, the DAX down 43 at 5203 and the CAC down 43 at 2957.
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 Indices See Losses After European Bourses Rout" last update by AG, 06-Sep-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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