Dax Plummets 2 Percent on Dreadful Economic Data
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 16 August 2011: 12.00am Update
European markets slipped back this morning as investors were reluctant to stretch the rebound of the last few sessions following the release of dreadful European data.
With risk aversion back in full swing, many will now be waiting for the outcome of the Franco-German summit on hopes that it can provide a boost to market sentiment.
The FTSE 100 dropped to 5265.83 this morning whilst the broader FTSE 250 fell to 10,341.45, erasing all of yesterday's gains. In Germany, the Dax plummeted over 2% to 5849.52.
UK inflation rises
Data released this morning showed that inflation rose sharply in July as banks raised fees and retailers had slashed prices in summer sales.
UK consumer price inflation accelerated to an annual rate of 4.4% in July from 4.2% in June. Analysts had expected the annual rate to edge up to 4.3%, hoping that some of the impact of early discounts by retailers, which led to a surprise slowdown in inflation in June, would calm down.
Core inflation accelerated to 3.1% from 2.8% and the retail price inflation gauge stood at 5% (in line with forecasts).
Downbeat European economic data
Adding to global uncertainties ahead of Franco-German talks on the Eurozone’s worsening debt crisis, data released this morning showed that Germany's economy hardly grew in the second quarter.
A weaker-than-expected reading for German second-quarter GDP showed the economy expanding by just 0.1% against forecasts of 0.5%.
Another report from Eurostat showed that European economic growth slowed more than economists forecast in the second quarter, with the expansion in GDP slowing to 0.2% following growth of 0.8% in the first quarter. Economists had forecast an expansion of 0.3% in the second quarter.
Franco-German summit
Today's abysmal European data will see many spread betting investors focus on the meeting between French president Nicolas Sarkozy and German chancellor Angela Merkel.
The duo will meet in Paris and begin talks at 3pm (London time), with a joint news conference to follow at 5pm (London time).
The two leaders plan to discuss options on further measures they can take to contain Europe's debt crisis. But despite increasing pressure, officials in Paris and Berlin said the talks would not address the subject of Euro bonds.
Mr Sarkozy and Ms Merkel will also focus on proposals to improve the Eurozone’s economic governance.
US pre-market open
September Wall Street futures dropped this morning following the release of disappointing data from Europe.
S&P 500 futures were over 1% lower at 1185.6 and Dow Jones futures were 0.74% lower at 11,319.00, pointing to a sharp decline when Wall Street opens this afternoon.
On the economic front, data for US import prices, housing starts and building permits for July will be released at 1.30pm (London time), followed by industrial production figures at 2.15pm (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 16 August 2011: 5.45am Update
In the US overnight, stocks continued their rebound from last week’s turmoil, logging the biggest three-day rally since March 2009.
Investors were able to look past some weaker-than-expected economic data, which included the Empire State Manufacturing Index. In fact, the major indices have now erased all of last week’s falls. The broad-based S&P 500 was the biggest advancer - rising 2.2% - while both the NASDAQ and Dow Jones Industrial Average added 1.9% respectively.
Asia & Australia
Across Asia, regional markets are mostly higher following the positive leads from Wall Street and M&A activity, with Google announcing a US$12.5bn bid for Motorola Mobility Holdings.
This boosted other mobile phone makers as participants looked for the next potential target. The Korean Kospi is the best performer - up 3.8% - following yesterday’s falls. Elsewhere, The Hang Seng and Nikkei 225 are 0.4% and 0.2% firmer respectively, while the Shanghai Composite is seeing some pressure, down a modest 0.3%.
In Australia, the ASX 200 is currently 0.5% weaker at 4259, just above its earlier session lows of 4255. Having enjoyed a 13.5% bounce from last week’s intraday lows, it seems the Australian market has now run out of steam. Subsiding levels of fear have enticed some investors back into equities, but the broader market desperately needs some positive catalyst to see a sustainable move higher.
While the consumer, industrial and healthcare sectors are all broadly positive, it is the financial, materials and energy sectors dragging the indices spread betting market lower, with losses in the vicinity of 1%.
Europe
Turning to the European session, we have some significant economic releases due in the days ahead, with UK inflation and Eurozone GDP today followed by US inflation data tomorrow.
Depending on the readings here, this could really define where sentiment goes next. The key question will be whether the economic recovery remains intact. If the numbers continue to paint this picture, further support may be found both in Europe and the US.
Earnings news is set to remain focused on Wall Street. Q2 numbers are expected from a clutch of retailers including Walmart and Home Depot, whilst Dell is also due to announce numbers for the same period. August is typically rather quiet, even if the last two weeks seem to have destroyed that idea, so there's still time for a subdued end to the month.
Ahead of the open we're calling the FTSE up 9 at 5360, the DAX up 19 at 6041 and the CAC down 3 at 3236.
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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"Dax Plummets 2 Percent on Dreadful Economic Data" last update by AG, 16-Aug-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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