Bernanke Fails to Reassure Stock Market Indices
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 9 September 2011: 11.15am Update
Speeches by President Barack Obama and Ben Bernanke were insufficient to push markets higher on the final day of the trading week, as the lack of any major new stimulus plans disappointed investors.
Mostly good data from China prevented heavier losses, but the general mood remained downbeat.
By 11am (London time), the FTSE 100 was down 0.7% at 5303.89, and the FTSE 250 had slipped 0.8% to 10281.38. France, Germany, Italy and Spain were all lower, reflecting continued Eurozone woes.
President Obama’s stimulus package fails to excite
The much-trailed speech from President Obama has failed to provide any market rally this morning.
The jobs plan, billed as a means of rescuing both the US economy and the President’s faltering ratings, was larger than expected, coming in at $450 billion. However, it is still around half the size of the stimulus plan Mr Obama introduced upon assuming office back in 2009.
Leaving aside the political machinations involved in the speech, it is difficult to see how the limited cuts to payroll and retirement taxes will give the US economy much of a lift.
Having said that, the establishment of a national infrastructure bank is a useful form of fiscal stimulus that may pay off in the long term. It is also a welcome change from continued monetary stimulus and state welfare that has so far failed to propel the US economy forward.
Ben Bernanke disappoints again
One cannot but help feel sorry for Ben Bernanke. Each time he speaks, hope rises that he will explicitly state that the Fed will begin new asset purchases. Hope then disappears, and spread betting markets fall along with it, once it becomes clear that the chairman is not about to spring an early Christmas present.
Last night’s speech reflected this pattern, with Mr Bernanke merely reiterating the existing range of policy options available to the Fed rather than unveiling a fantastic rescue plan. We can expect this disparity between hope and reality to continue all the way to the next Fed meeting.
China news provides some hope
A raft of data from China provided much for markets to chew over on a fairly quiet day for economic news.
CPI figures showed that price growth had moderated in August, from 6.5% in July to 6.2%, and while retail sales grew in line with expectations at 17%, industrial production slipped slightly, growing at 13.5% for August from 14% in the previous month.
Taken together, the data offers hope that at least part of the global economy is still growing. The easing of price increases could show that Chinese tightening measures are beginning to take effect without damaging the economic growth of the nation.
However, Asian markets failed to get much of a lift from the news, and only really stellar growth from the Chinese dragon will be sufficient to offset the continued woes from the US and Europe.
Tullow strikes black gold
Shares in Tullow Oil jumped 13% to 1390p after a joint venture in which it has a 25% stake found oil off French Guyana.
The company observed that the find, in the Jubilee field, showed that the oil field stretched across the Atlantic, and provided the opportunity for significant long-term operations in the region.
Tullow shares have jumped impressively since their nadir in August, when they slumped as low as 945p, helped by rumours that China’s National Offshore Oil Corporation was sizing up the firm as a potential bid target.
US pre-market
After the policy speeches yesterday, today is a quiet day for economic news, with only July wholesale inventories out at 3pm (London time).
US futures are currently lower, down 0.2% for the Dow and 0.45% for the S&P 500, suggesting that Wall Street may end the week on a fairly downbeat note.
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 9 September 2011: 6.00am Update
In the US overnight, the major stock market indices all finished the session lower after briefly pushing into positive territory.
This came after Fed Chairman Ben Bernanke failed to provide any details as to how they may look to boost the ailing economy. Also, traders were treading cautiously ahead of US President Barack Obama’s jobs speech.
The S&P 500 was the worst performer, down 1.1%, while the Dow Jones Industrial Average and NASDAQ fell 1% and 0.8% respectively.
Asia & Australia
Across Asia, regional markets are mostly higher, shrugging off the weaker overnight leads after President Obama’s jobs creation plan spurred optimism, sending US futures higher.
The Hang Seng and Shanghai Composite are the best performers - both up 0.2% - while the Nikkei 225 is flat. The Kospi is 0.8% softer.
In Australia, the ASX 200 is currently 0.6% firmer at 4212, having earlier reached a high of 4232.
While US markets sold down late in the day after Bernanke’s speech, the Australian market has responded positively to President Obama’s jobs package, which was announced prior to the commencement of trade.
With the President’s address inspiring some risk appetite we are seeing some modest gains across the energy, materials, industrial and financial sectors. The defensively-orientated healthcare and property trust sectors are the only sectors in negative territory.
Looking ahead
The Dow Jones may have closed last night nursing triple digit losses, but investors appear to have been cheered by President Obama's job creation and public sector spending plan.
There's also an initial feeling that the bulk of the proposals won't get tied down in political point scoring like we saw with the debt ceiling debate just over a month ago, so the optimists are back in play.
It's certainly set the tone for markets in Asia, although the futures are currently suggesting modest losses in Europe at the open, taking account of that relatively big move down on Wall Street during the latter part of the day.
German CPI, UK PPI and US wholesale inventories will ensure there's something to be working with on the economic calendar before the weekend break, although earnings news is looking somewhat thin on the ground.
Full year results from UK pub group Wetherspoon are due, whilst US supermarket chain Kroger is due to release Q2 numbers, but there’s little else that's high profile.
Ahead of the open we're calling the FTSE down 25 at 5315, the DAX down 33 at 5375 and the CAC down 14 at 3072.
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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"Bernanke Fails to Reassure Stock Market Indices" last update by AG, 09-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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