Equities Spread Betting Markets Finally Rally on Bargain Hunting
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 12 August 2011: 11.00am Update
UK markets extended their gains from yesterday, helped by rising bank stocks that made ground after European regulators acted to ban short-selling.
Still, in the absence of really positive news, the gains look to be temporary at best.
By 10.30am (London time), the FTSE 100 was up 1.34% at 5231.77, while the broader FTSE 250 had added 1.84% to reach 10,326.79. European stock markets also surged, with bourses in France, Germany, Italy and Spain all regaining some of the ground lost in recent days.
Europe hits out at evil speculators
After hours of 'will they, wont' they' manoeuvring yesterday, several European nations have taken steps to ban short-selling of financial stocks. It would appear that the day had been spent trying to get all of the Eurozone to impose a ban, but in the end only Spain, France, Belgium and Italy signed up.
Interesting therefore, to note that, of these four, two are already deemed to be on the brink of a bailout, while Belgium is regularly mentioned as being at risk due to the absence of a stable government (around 14 months and counting, by the way) and France has come under close scrutiny this week.
While the European Securities & Markets Authority (ESMA) proclaimed the move as a harmonised regulatory action, in actual fact there are differences in the ban. Spain has banned all short selling of products connected to financial stocks, while France has only opted to ban direct short-selling of equities.
The parallels with 2008 continue to deepen, but we would note that markets in the UK and US continued to slump after those countries imposed their own short-selling bans. A ban on short-selling tends to have the effect of limiting liquidity, thus making spread betting market moves even more volatile, resulting in even heavier falls, the very thing the ban was designed to prevent.
Still, for the moment at least banks are enjoying some decent gains. In the UK, Barclays surged 5.5% to 187.95p, while Lloyds added 2.8% and RBS rose 3%.
On the continent, banks also rose, with Belgian bank Dexia rising, along with Italy's Unicredit and France's Credit Agricole. Societe Generale, around which rumours have swirled all week, was only up 0.13%.
Company insiders intensify share buying
As if there weren't enough similarities to 2008, market data has shown that company directors and managers are buying shares at the fastest rate since the first half of that cataclysmic year.
While everyone else appears to be selling, company directors and other personnel have stepped up their purchases of stock. Filings with the US Securities & Exchange Commission show that $861 million worth of shares has been purchased.
However, company personnel also bought heavily in late 2007 and 2008, so this may not be a sign that the stock market is about to improve.
IG Index maintains its own list of director share purchases on its website, covering buys and sells for UK-listed firms
US pre-market
US September futures are broadly higher, with those for both the Dow and S&P 500 up 0.2%.
On the economic front, US July retail sales are released at 1.30pm (London time), with growth of just 0.2% (excluding cars and fuel) forecast for the month.
At 2.55pm (London time), the Michigan consumer confidence index for August is released, with the measure expected to decline from 63.7 to 62, while June business inventories follow close behind at 3pm, with growth of 0.5% expected.
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 12 August 2011: 6.00am Update
In the US overnight, stocks jumped sharply across the board as the major indices wiped out the losses from previous sessions.
Buyers moved into the equities spread betting market to snap up beaten-down blue chips, and a stronger-than-expected unemployment claims figure eased some concern about the slowing economy. The NASDAQ was the top gainer - adding 4.7% - while the S&P 500 and Dow Jones Industrial Average jumped 4.6% and 4% respectively.
Asia & Australia
Across Asia, regional markets are mostly higher following the positive lead from Wall Street, where participants were buoyed by news of short selling restrictions in Europe and stronger-than-expected jobless claims numbers.
The Hang Seng is the biggest gainer - up 1% - while the Kospi and Shanghai Composite are up 0.5% and 0.1% respectively. The Nikkei 225 is seeing some selling pressure, down 0.4%.
In Australia, the ASX 200 is currently 0.6% firmer at 4166, having earlier touched an intraday high of 4216.
With European and US markets enjoying significant rebounds overnight, the Australian market always seemed poised to end the week on a positive note, and it has certainly panned out that way.
Gains for the day are broad-based, with the heavyweight materials, energy and industrial sectors all up between 0.3 and 1%. The financial sector has given up earlier gains and is now trading flat.
Europe
Tonight, attention is again going to be very firmly fixed on Europe, where the heightened levels of volatility have led to regulators in a number of markets - namely France, Belgium, Spain and Italy - either imposing or extending short selling bans.
This is very reminiscent of the moves in 2008, when a degree of artificial inflation in stock prices was considered a result of the action, so the response amongst the relevant indices will be closely watched in the hours ahead.
This news, combined with the recent upward momentum we've seen, could also help ensure we see a slightly less dramatic finish to the week.
That said, with traders still jittery, any negative news could see people heading for the exit once again.
Any wobble in the US retail sales figure or Michigan confidence reading could be precisely the sort of trigger for another round of selling, but earnings calendars are looking relatively quiet, with Germany's ThyssenKrupp and the UK's Trinity Mirror amongst the stand-outs here.
Ahead of the open we're calling the FTSE up 30 at 5192, the DAX up 33 at 5830 and the CAC up 10 at 3099.
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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"Equities Spread Betting Markets Finally Rally on Bargain Hunting" last update by AG, 12-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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