Spread Bets Daily Markets
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech - Research Analyst, IG Index.
Spread Betting 19 Nov 08
The FTSE began lower in early trading despite yesterday's late rally, and was down by 67.6 points or 1.6% at 9am.
The FTSE has been led downwards this morning by the mining sector as metal prices slide, with Lonmin 6.6% weaker; Xstrata down by 6.3% and Vedanta Resources 5.3% off around 9.30am. Legal & General Group topped the fallers though, 9.1% down, while building materials firm Wolseley - fresh from yesterday's announcement of a further 2300 job cuts and the closure of 200 outlets - was 7.3% weaker.
On the positive side though, HBOS (+8.7%) was among the early leaders in the UK's blue-chip index, with shareholders in Lloyds TSB set to vote later on the intended takeover of the bank. Credit agency Experian (+13.3%) was the only blue-chip ahead in the leaderboard. Man Group (+3.95), Thomas Cook (+2.2%) and ICAP (+2.1%) also enjoyed an early boost on Wednesday.
A volatile session in the US ultimately saw the Dow Jones (Wall Street) close up 151.2p (+1.8%) to 8424.8p on the back of some rare positive company results, though Europe's leading indices have followed the FTSE lower this morning. At 10am the Dax 30 was 61.6 points (-1.3%) weaker to 4517.9, while the French CAC 40 had fallen 50.8 points (-1.6%) to 3166.6.
In UK retailing, Woolworths has revealed that it is in talks about a potential takeover after rejecting a previous bid from the Iceland founder Malcolm Walker in August. The Woolworths chain store, now almost 100 years old, has seen its share price plunge by 83% this year as the economic downturn has hit business, also announcing a record six-month loss. [1]
November's minutes from the latest Bank of England meeting were released earlier this morning, and showed a unanimous 9-0 vote in favour of the 1.5% slash in rates, which was the biggest cut in 17 years. An even larger cut was discussed but discounted due to the potential shockwave it may have caused in financial markets. [2]
The latest CPI figures will be of great interest across the Atlantic at 1.30pm (London time), particularly after yesterday's 16-year record month-on-month fall in UK inflation to 4.5%. The latest surveys in the US point towards a similarly significant drop. Among a busy midweek schedule in the US, last month's Housing Starts and Building Permits will offer clues to the latest trends in the beleaguered housing market.
[1] Source: bbc.co.uk (19 Nov 2008)
[2] Source: bbc.co.uk (19 Nov 2008)
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 18 Nov 08
We have witnessed a cautious start for British and European equity markets this morning, with major indices tracking losses seen in Asia and the US. Wall Street ended its trading session in the red yesterday, with the Dow closing 223.73 points.
(-2.63%) lower at 8273.58 and the S&P 500 ending 22.54 points (-2.58%) below its previous close at 850.75 on evidence of an accelerated global slowdown.
Yesterday, Japan fell into a recession and Citigroup, the second-largest US bank, announced plans to shed over 50,000 jobs - far more than had been anticipated. Asian markets felt the brunt, with Japan’s Nikkei losing 194.17 points (-2.28%) to end at 8328.41 and Hong Kong's Hang Seng falling 613.64 points (-4.54%) to 12915.89 on the back of grim economic data and sagging exporter and banking sector shares.
'Growth is still going to deteriorate,' said Lucy MacDonald, a chief investment officer at RCM UK Ltd. 'We've seen a big de-rating and we're seeing the earnings come down to match that.' [1]
Unsurprisingly, the downbeat sentiment spread to British and European markets this morning, offsetting the positive impact of some better-than-expected corporate news by ICAP and Rexam.
By around 10.15am (London time) the FTSE 100 was trading at 4053.37, down 78.79 points (-1.91%), while the broader FTSE 250 was down 143.26 points (-2.4%) at 5833.77. In Europe, the French CAC 40 retreated 57.89 points (-1.82%) to 3124.14 and the Dax 30 slid 73.25 points (-1.61%) below its previous close at 4484.02.
'There's no particular change in the economic backdrop but the company news has generally been more positive than people were expecting,' said Gareth Evans, UK equity strategist at UBS. [2]
Interdealer broker ICAP was among the companies reporting upbeat results this morning: ICAP's share price initially jumped to 271.75p (+8%) but retreated 2.8% below its previous close to 244.5p by mid-morning after it reported that full-year earnings would beat consensus estimates.
The company's interim profits rose to a record after unprecedented levels of volatility bolstered trading commissions on currencies and securities; interim net income increased 5% to £84 million, up from £80 million a year ago, while interim revenue climbed 22% to £764 million. `ICAP has continued to benefit from the generally high levels of volatility in the wholesale financial markets,' explained Chief Executive Officer Michael Spencer in a statement released today. [3] The broker now expects its full-year pre-tax profits to be ahead of average analyst forecasts of £347 million. In 2008, ICAP reported a pre-tax profit of £330 million.
Also today, Rexam, the world's biggest drinks can manufacturer, was up 1.11% to 320p after the firm revealed that its 2008 outlook remains unchanged. In its interim management statement, Rexam said that results over the last four months were in line with expectations because of favourable currency movements. Rexam warned, however, that it is still too early to say how the economic downturn will affect 2009 trading.
Unfortunately, none of this news lent any support to the FTSE this morning, with UK banks and miners among the heaviest blue-chip losers. Barclays made the headlines after it responded to shareholder criticism concerning its move to seek new funding from the Middle East. The bank altered the terms of its £7 billion capital raising plans to allow existing institutional shareholders the chance to participate in the issue of securities paying a 14% coupon. Barclays' share price initially rose 4.9% but later retreated, falling 2.6% below its previous close to 150p this morning.
Other casualties included HBOS, down 5.6% to 70.3p, HSBC, which fell 4.7% to 675.25p and Lloyds TSB, down 2.35% to 145.5p. RBS and Standard Chartered were also down by around 6% to 41.9p and 675.5p respectively.
Miners were also under pressure this morning after metal prices slid further: Anglo American was seen losing 3.15% of its value, Eurasian Natural Resources was down 5.6% to 234p and Rio Tinto retreated 5.4% to 2325p. Platinum producer Lonmin was also in the spotlight after it predicted that its market will remain weak until 2010. The firm has pledged to close unprofitable mines as part of its cost reduction plans. Its shares were 6% lower at 821p.
Oil and gas producers were once again under pressure after oil prices continued to trade near their 22-month lows; January Brent crude oil was 1.2% lower at $51.68 a barrel and December Light Sweet crude was down 0.82% at $54.5 a barrel this morning.
Some of the worse energy victims were BG Group, down 1.9% to 791p, Cairn Energy, 2.54% lower at 1456p and Tullow Oil, which was 2% below its previous close at 447.75p.
Plumbing and heating supplies company Wolseley was also in the limelight, losing 5.1% of its value after it revealed that it pre-tax profit had fallen by 45% and that it would have to close over 200 branches.
In economic news this morning, official government data shows UK inflation has tumbled on the back of falling oil and food prices. Consumer prices were up 4.5% on the year for October, compared with 5.2% a month before. 'Inflation is now yesterday's story,' said Matthew Sharratt, an economist at Bank of America in London. 'It's going to fall well below the target next year. This leaves the door wide open for a deep cut in interest rates in December,' he added. [4]
[1] Source: Bloomberg News (18 Nov 2008)
[2] Source: Reuters News (18 Nov 2008)
[3] Source: Bloomberg News (18 Nov 2008)
[4] Source: Bloomberg News (18 Nov 2008)
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 17 Nov 08
The FTSE had a lacklustre start this morning as mounting uncertainty regarding the severity of the current economic downturn dented market sentiment.
The trading day started with Japan, the world's second largest economy, falling into a recession for the first time since 2001. Tokyo's Cabinet Office this morning reported that the country’s gross domestic product shrank by 0.1% in the third-quarter, following a (revised) 0.9% contraction in the second quarter.
'The problem for Japan's economy is that it has become highly dependent on global demand in the latest recovery cycle,' said Hiromichi Shirakawa, chief economist at Credit Suisse. 'The fragility of the economy has definitely increased, and we're not seeing any upward momentum in domestic demand.' Mr Shirakawa predicts another contraction in the October-December quarter, while Kyohei Morita, chief economist at Barclays Capital, Japan, believes that 'It is very possible the economy will contract for four straight quarters (because) exports and capital expenditures are likely to weaken further.' [1]
Japan's economic and fiscal policy minister Kaoru Yosano also confirmed that the economy had entered a recession that may deepen: `Given that the global economy is decelerating, Japan's downturn will continue,' he said. Mr Yosano believes there's a risk the slump will become 'more severe' because the global financial crisis is spreading to emerging economies. [2]
Back home, economic conditions did not show any sign of respite either: First, online property website Rightmove revealed another decline in house prices. The company said the average asking price for a home in England and Wales fell by 2.9% in November to £229,691, following a 1% gain the month before. The biggest decline came from the West Midlands, which dropped 5.6% from October. London prices, on the other hand, slipped 1.3%.
'Following the major financial shocks, banks are going to be extremely cautious about lending,' Miles Shipside, commercial director at Rightmove, said in an interview. 'There's unemployment coming down the track often that leads to repossessions and that could trigger further house price falls if there are more forced sales.'
Secondly, a separate report from the Confederation of British Industry (CBI) stated that the UK economy will contract the most in almost 30 years next year, and that house prices are now falling at their fastest pace since 2002. The report by the UK’s biggest business lobby predicts that UK gross domestic product will contract by 1.7% in 2009, and the number of people out of work will rise to nearly three million by 2010. Also see Spread Betting on the Housing Market.
'What is clear is that the short and shallow recession we had hoped for a matter of months ago is now likely to be deeper and longer lasting,' said John Cridland, CBI deputy director-general. [3]
Although finance ministers at the Group of 20 (G-20) summit revealed they will do everything they can to tame recessionary pressures, very few proposals on how to tackle a global economic downturn were made. What did emerge, however, is that financial market regulations will be stricter, indicating that banks and financial institutions will probably have less freedom and probably be less profitable than they were in the past. This also contributed to the downbeat sentiment this morning, especially for banks.
By around 10.15am (London time) we saw the FTSE 100 falling 58.56 points (-1.38%) to 4174.41 and the broader FTSE 250 trading at 6069.61, representing a 58.15 point drop (-0.95%) from its previous close. In Europe, the German DAX was down by 67.71 points (-1.44%) to 4642.53 and the French CAC 40 had retreated 46.23 points (1.4%) to 3245.24.
The major sectors weighing the most on the FTSE this morning were banks and resource companies. Barclays was almost unscathed, down by just 0.57% to 158.2p. In contrast, Lloyds TSB plunged 8% to 152.4p, HBOS fell 4.4% to 82.7p, Standard Chartered retreated 2.6% to 756.5p and HSBC shed 2.6% of its value to 700.25p.
Most resource companies were also in the red, with miners Anglo American, Antofagasta and Eurasian down by around 3.3% to 1249p, 328p and 253.25p, respectively. Oil and gas producers were also knocked lower, with BP Group down 1% to 837p, Tullow Oil 1.6% lower at 458.75p and Royal Dutch Shell 'A' shares trading 1.85% below its previous close at 1644p this morning as a result of lower oil prices.
Crude oil also fell on the back of weaker outlook, with January Brent crude down 1.6% to $53.38 a barrel and December Light Sweet crude 1.74% lower at $56.05 a barrel.
In Europe, Hypo Real Estate made the headlines this morning after it announced that its liquidity needs until the end of 2008 are higher than the €50 billion rescue aid. The company is expecting further losses for 2008 and 2009. Its share price was up 3% to €3.34 a share, nevertheless.
Looking ahead to the US this afternoon, equity markets are likely to open in negative terrain, with December Dow and S&P futures ticking marginally lower this morning. In economic data, the New York Empire State manufacturing index and industrial production data are scheduled for release this afternoon at 1.30pm and 2.15pm (London time) respectively.
[1] Source: Bloomberg News (17 Nov 2008)
[2] Source: Dow Jones Newswires (17 Nov 2008)
[3] Source: Reuters News (17 Nov 2008)
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 14 Nov 08
British and European equity markets rose this morning following a strong overnight rally on Wall Street.
The Dow ended the session 552.59 points (+6.67%) higher at 8835.25, while the S&P 500 closed 58.99 points (+6.92%) higher at 911.29 after hitting a fresh five-year low of 818.91. The rally came in the final hour of the closing bell when equities had fallen to levels that appeared undervalued.
Asian markets also followed suit, with Hong Kong's benchmark Hang Seng Index rising 321.31 points (+2.43%) to 13542.66 and Japan's Nikkei 225 soaring 223.75 points (+6.92%) to 911.29 today.
'There's a return to certain stocks that have suffered,' said Nathalie Pelras, a fund manager at KBL Richelieu Gestion. 'Even with this significant rally, valuations are still far lower than they were a week ago.' [1]
The impressive turnaround seen on US and Asian markets helped sentiment in equity markets in Britain and Europe this morning. By around 10.15am (London time) the FTSE 100 was up 145.44 points (+3.49%) at 4312.13 and the broader FTSE 250 was 167.76 points (+2.72%) above its previous close at 6324.93.
In Europe, Germany's DAX was 138.93 points (+3%) higher at 4789.56 and the French CAC 40 had climbed 66.39 points (+2%) to 3336.9.
Energy and mining sector shares that have fallen severely over the past few weeks, rose on the back of a renewed bargain hunting spree. Among miners, we saw Anglo American up 9.13% at 1362p, Antofagasta 8.75% higher at 357.5p and Xstrata trading at 1028p, representing an 8% rise over its previous close. Rio Tinto and BHP Billiton also rose, both up by around 3.5% to 2660p and 961p respectively.
Energy shares, which generally trade in the same direction of crude oil, also rose this morning even though crude oil futures were lower. BP was up by 5.8% to 498.5p, Cairn Energy climbed 5.6% to 1518p, Tullow Oil had advanced 4.3% to 473p and Royal Dutch Shell 'A' shares were up 5% to 1701p.
January Brent Crude Oil was, however, down by $1.03 (-1.83%) to $55.36 a barrel and December Nymex was $0.66 (-1.13%) lower at $57.58 a barrel this morning despite speculation of another production cut by the Organisation of Oil Exporting Countries (OPEC).
OPEC, which supplies around 40% of the world's oil, is 'very likely' to recommend a further cut in production this month to halt a slide in prices, Iran said. [2]
'The market is in turmoil,' Mohammad Ali Khatibi, Iran's OPEC governor, told the Mehr News agency in Tehran today. 'In order to strengthen prices, OPEC is very likely to recommend another production cut as the two previous ones had no effect,' Khatibi said.
In corporate news, RBS’ rose 5% to 55.3p this morning after the company announced that it will be shedding 3,000 jobs worldwide over the next few weeks.
BT Group also rose 3% to 126.3p this morning as investors welcomed news of its cost-cutting efforts. The company yesterday said that it intends to axe 10,000 jobs. Also supporting the rise in BT's share price were comments from Jonathan Groocock of Investec. He said, 'Operating trends are robust in most of the business and management are focused on delivering shareholder returns. The risks are now overcompensated for in the current share price.' [3]
On the economic front, third-quarter Gross Domestic Product (GDP) figures for Europe contracted, throwing the eurozone economy into a formal recession today. GDP shrank 0.2% in the third quarter after contracting by another 0.2% in the second-quarter. Yesterday, Germany also fell into a recession after its third-quarter GDP contracted.
Looking ahead to the US this afternoon, the pulse of the embattled US economy will be measured by the release of various economic data, including import price index and the all-important retail sales data. The figures are scheduled for release at 1.30pm (London time).
Into the mid-morning session, December Dow futures were down by 128 points, while December S&P futures ticked 16.2 points lower, indicating that, as things stand, Wall Street is likely to open lower this afternoon. This is probably in anticipation of poor retail sales figures and on profit-taking following yesterday's rally.
[1] Source: Bloomberg News (14 Nov 2008)
[2] Source: Bloomberg News (14 Nov 2008)
[3] Source: Financial Times (14 Nov 2008)
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 Bets Daily Markets" written by AG, last updated 19-Nov-2008
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