Banking Stocks Lead Spread Betting Markets Higher
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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 October 2011: 11.00am Update
European stock markets rallied this morning, with banks leading gains amid continued hope for more concrete action by European policymakers, while spread betting investors await the latest interest rate decisions from the European Central Bank and the Bank of England.
By 10am (London time), the FTSE 100 and 250 were up by 1.60% and 2.03%, at 5183.61 and 9762.35 respectively. Both indices extended their rally for another day with the wild swings that we have seen recently likely to be a reflection of the real drivers of markets; hope and fear.
European Banking Authority gets involved
Europe's banking regulator, the European Banking Authority (EBA), announced last night that it has started to re-examine the strength of the region's banks, modelling a big write-down of all peripheral Eurozone sovereign debt. The exercise is likely to identify capital shortfalls across the banking system by as much as €200 billion.
The EBA is currently involved in a two-day crisis board meeting designed to assess the potential hit of sovereign restructurings and is also closely involved in talks with European officials and governments over methods that could be used to effectively recapitalise banks (which would hopefully enable them to cope with sovereign defaults).
The move came after the German chancellor, Angela Merkel, said she was prepared to recapitalise her country's banks if necessary and as Greece inches closer to a default.
The regulator will provide a country-by-country breakdown of how much new capital banks would need in the event that Greece's bonds were written down, as a precautionary measure intended to inform rapidly accelerating negotiations on EU-wide bank recapitalisations.
Signs the European leaders were moving to recapitalise banks helped European shares rise for another day. Banking shares rose further after European Commission president Jose Manuel Barroso said policymakers were proposing coordinated action to recapitalise the region's banks.
The International Monetary Fund also gave its support for a quick recapitalisation yesterday.
Standard Chartered Bank rose 5.67% to 1286p, while Lloyds and RBS were up over 3.5% to 34.23p and 23.41p respectively.
Yahoo!
Shares in the Yahoo rose 9% last night after reports were released that Microsoft is to join a host of other companies looking to make a bid for the internet giant, which has a market value of about $20 billion.
Buyers pushed Yahoo up 20% during the course of the week to $15.77 on hopes of a bidding war between Microsoft and Alibaba, the Chinese e-commerce site, which confirmed its interest in buying out Yahoo last Friday.
Microsoft resurfaced as a potential buyer after a bitter and unsuccessful fight to take over Yahoo in 2008, offering to pay as much as $47.5 billion for the company. Microsoft closed up 2.2% to $25.89.
US pre-market
December Dow and S&P 500 futures were both up almost 1% at 1144.60 and 10,940.00 respectively, pointing to a strong opening for Wall Street later. Looking ahead to this afternoon, US economic data release includes weekly jobless claims figures due at 1.30pm (London).
In Europe however, forex spread betting investors will bid farewell to European Central Bank president Jean-Claude Trichet as he delivers his final monetary policy decision and holds his final news conference. Consensus is that interest rates will be held for another month.
The Bank of England will also announce their decision, with rates also expected to remain on hold, though markets will be interested to see if there is any more support on further quantitative easing.
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 October 2011: 6.00am Update
Overnight, US stocks again rallied sharply in the final minutes of trading to finish near their highs, in another volatile session.
They were buoyed by some better-than-expected economic news, and optimism that the European Finance Ministers may be able to deliver on a bank recapitalisation plan.
Among the major averages, the Dow Jones Industrial Average added 1.2% to end at 10939, the S&P jumped 1.8% to 1144, while the NASDAQ surged 2.3% to 2460. Most S&P sectors finished higher, led by advances in materials and energy names.
Economic news
In economic news, the ADP private sector employment report suggested 91,000 private sector jobs were created in September, surpassing consensus estimates of around 75,000, and creating some optimism ahead of Friday’s non-farms payroll report.
In contrast, the employment component of the ISM service index suggested a contractionary employment reading, the first of this type since August 2010. The broader ISM services index came in at 53, slightly down on August’s reading of 53.3, but above expectations of 52.9.
Asia & Australia
Across Asia, regional markets are all significantly higher, riding on the back of the current momentum on Wall Street. The Hang Seng and the Kospi are seeing gains of 4.5% and 3.8% respectively while the Nikkei 225 is enjoying a more modest advance of 1.9%. The Shanghai Composite is closed.
In Australia, the ASX 200 is currently 3.1% firmer at 4049, right on its highs of the day. After another session of healthy gains in offshore markets it is not surprising to see the Australian online spread betting market building on yesterday’s strength.
Gains for the day are broad based with all sectors in positive territory. The biggest advances have come from the materials, energy and financial sectors which have been heavily sold down over the last month.
Europe
Turning to the European session, there is an expectation for Europe to keep grinding higher in early trade. Today sees the latest interest rate verdicts from both London and Frankfurt, with the commodities spread betting market divided as to whether the Bank of England will announce further stimulus measures now or leave it another month.
Failure to move may well end up weighing on UK equities. Once again, there's a scattering of earnings news, with retailers set to be in focus here as September sales data is reported from a number of the US chains, whilst in the UK both Greggs and Halfords post their IMS.
Ahead of the open we're calling the FTSE up 30 at 5132, the DAX up 19 at 5492 and the CAC up 13 at 2987.
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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"Banking Stocks Lead Spread Betting Markets Higher" last update by AG, 06-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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