CAC Spread Betting Market Higher as Key EU Negotiations Unfold
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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 December 2011: 11.00am Update
Markets are caught like the proverbial 'rabbit in the headlights' this morning, with traders and spread trading investors cautious due to the ongoing summit in Brussels. Moves are likely to remain fairly range-bound until the conclusion of the summit over the weekend.
By 10.30am (London time), the FTSE 100 was up only 1.5 points at 5485.57, while the FTSE 250 was 17 points higher at 10,103.16. EU markets also posted some gains, with the CAC 40 up 0.5% and the DAX up 0.2%.
Two-speed Europe
Depending on your politics, Britain has either isolated itself from the rest of Europe, or saved itself from a currency and fiscal union doomed to low growth for the foreseeable future. Last night, Prime Minister David Cameron did his Margaret Thatcher impression and hand bagged the proposed treaty change for the EU.
France and Germany attempted to get all 27 states of the EU to agree to a new treaty, but Gallic refusal to allow exemptions on new financial taxes for the City of London meant that Mr Cameron felt compelled to opt for the 'nuclear button', and use Britain's veto.
Some will see this as a shameless promotion of the national interests of the UK over that of greater Europe, but France and Germany were merely acting in their own interests, ie that of creating a closer fiscal union.
As a result, the 17 Eurozone states, and six other non-euro nations, will press ahead with a separate deal outside of the EU, creating what some might deem a 'two-speed Europe'. The changes will involve new budgetary rules and also capping the size of the bailout fund at €500 billion.
Further discussions will continue today, so markets are likely to remain fairly subdued until the completion of the summit.
What is not yet certain however is whether the Eurozone will get agreement on tighter supra-national oversight. The hope is that such an agreement will allow the ECB to get to work in sovereign bond markets, even though only yesterday the institution's head said that it had no plans to start a massive programme of bond buying.
Even if greater oversight is achieved, it will simply be an enhanced version of the Growth & Stability Pact that accompanied the creation of the euro. Countries will still flaunt the rules, and likely get away with it, undermining confidence in the fiscal probity of the enhanced currency union.
For my part, I think Britain has made the right decision in standing aside from this change, remaining with the freedom to control its own currency and national budgets.
The future is still uncertain, but it may well be that Portugal, Ireland, Greece and others will regret surrendering more national sovereignty to the EU and remaining on board the stricken liner of the Eurozone, having been given a chance last night to run for the lifeboats.
Equity moves remain limited
A dearth of corporate news (which would probably have been ignored among the Eurozone news anyway) means that markets have little else to go on this morning. Early losses were recovered, but traders will be wary of committing themselves in any substantial fashion since this would leave them at the mercy of rumour and counter-rumour emerging from Brussels.
The banking sector was broadly higher this morning, making some dent in the scale of yesterday's losses.
Some positive inflation data from China has helped lift the mining sector this morning, although a cut in guidance meant that African Barrick Gold has failed to participate in the rally, down 4.2% at 498p.
US pre-market
Dow futures are currently up 47 points, while those for the S&P 500 have risen 5.2 points. However, news from Europe could easily see these gains disappear.
The preliminary December reading for the Michigan consumer confidence index is published at 2.55pm (London time), providing a brief but nonetheless welcome distraction from the Brussels summit. The index is expected to improve slightly, rising to 65.8 from 64.1.
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 December 2011: 5.00am Update
Global markets slid overnight after ECB President Mario Draghi dampened speculation that the Central Bank would boost its bond purchase program to help distressed European countries.
Regulators also said the region’s banks will need to raise more capital than previously estimated. Sentiment swiftly turned negative following the news. The sell-off came despite an ECB rate cut and yet another round of strong US economic data.
Among the major averages, the Dow Jones Industrial Average fell 1.6% to 11,998. The S&P shed 2.1% to 1234, while the NASDAQ was down 2% at 2596. Unemployment claims dropped to 381,000, beating a forecast of 397,000.
Asia
Across Asia, regional markets are weaker as spread betting investors tread cautiously ahead of what could be a game-changing weekend. The region was fairly resilient earlier considering the losses seen in US and European markets overnight, and was temporarily shored up by some economic data out of China.
Inflationary pressures fell sharply, with CPI numbers from China coming in below expectations at 4.2%, indicating significant cooling in the economy. PPI numbers also came in lower than expected, only rising 2.7% in November compared to forecasts of a 3.3% rise. This could increase the scope for further monetary easing from China.
There was also some news out of Japan, with its economy growing less than the government’s initial estimate last quarter.
The Hang Seng is the worst performer in the region with a 1.9% drop, while the Nikkei is down 1.4% and the Shanghai Composite is half a percent lower. Lagging the region is the ASX 200, which is down 2%.
After having been sold off significantly overnight, US and European markets are pointing towards losses at the open.
Australia
Australia's S&P/ASX 200 is currently down 2% at 4198, with some big falls in the materials and financial spaces. Cyclical stocks are struggling after global markets got sold off overnight, as we approach the eye of the storm on the European debt crisis.
Energy names are among the worst performers of the day, with Woodside Petroleum dropping 3.3% after oil slipped 2% overnight. The telecoms and other defensive sectors are outperforming, with Telecom New Zealand rising 0.6%. Small miners are among the worst performers today, with the likes of Medusa Mining and Oceanagold dropping over 4% each.
Once again, the US continues to deliver, improving economically behind the scenes, with Europe remaining at the forefront of traders’ minds. There is a sense that if it wasn’t for the situation in Europe, US markets would be on the verge of locking in a very strong year.
Markets had lined themselves up for a comprehensive solution this week, but it now seems the effects are quickly waning. Investors seem to be underwhelmed by the news out of Europe thus far and this has seen shares spread betting markets pull back significantly in the latest session.
There is a lot of economic data out of the UK tonight with PPI input, trade balance, PPI output and CB Leading Index numbers due out.
Ahead of the European open we're calling the FTSE down 43 at 5441, the DAX down 58 at 5816 and the CAC down 23 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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"CAC Spread Betting Market Higher as Key EU Negotiations Unfold" last update by AG, 09-Dec-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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