Financial Spread Betting Markets Rise on Optimism over EU Crisis Deal
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 17 October 2011: 10.45am Update
European equities extended last week’s rally into a third week, as financial spread betting investors rushed back into equities on mounting expectations that Eurozone leaders will agree on and present a plan to fight the debt crisis at this weekend's European Union summit.
By 10.15am (London time), the FTSE 100 was up 1.02% at 5522.91, while the FTSE 250 had gained 0.87% to 10,427.73. Markets in France and Germany were also over 1% higher.
EU ultimatum
European leaders have one week to resolve their differences and present a plan to resolve the European sovereign debt crisis. G20 members, who concluded talks in Paris over the weekend, said that a failure to end the crisis would endanger the world economy. The deadline was set for 23 October, the day of the EU summit.
The plan, which is still to be made public, includes magnifying the strength of the €440 billion European Financial Stability Facility rescue fund, fresh capital for banks, a new push to increase competitiveness, consideration of European treaty amendments to tighten economic management, and a larger write-down of Greek debt.
German finance minister Wolfgang Schauble said on Sunday that the Greek debt crisis cannot be solved without larger write-downs. From the initial 21%, investors now believe it could involve as much as a 50-60% write-down.
Further supporting market sentiment this morning was EU Economic and Monetary Affairs commissioner Olli Rehn, who said that Eurozone leaders were close to agreeing on a plan.
Meanwhile this morning, Christine Lagarde, the International Monetary Fund (IMF) managing director, said that the IMF has enough capital at the moment, dismissing allegations made last week that it may need a capital injection of about $350 billion to give it more firepower to fight economic crises.
UK economic growth revised
This morning, new data showed that economists forecast Britain to grow less than expected this year. A report released by Ernst & Young said that the central bank's second round of asset purchases is unlikely to kick-start the economy as worries over the Eurozone debt crisis and uncertain global demand linger.
Ernst & Young downgraded its 2011 GDP forecasts to 0.9% from the 1.4% it predicted three months ago. Growth forecasts for 2012 were also cut to 1.5% from 2.2%, while unemployment is forecast to keep rising until spring 2013.
The report advised that policymakers should consider cutting interest rates to a new record low of 0.25% from 0.5%, and that the finance minister, George Osborne, should cut the National Insurance employee tax and property purchase taxes, which could support the construction industry and likely help consumer spending.
Philips’ profit disappoints
Dutch electronics group Philips announced it was to cut 4500 jobs after a report revealed that third-quarter earnings plunged, and the outlook for its products continued to be uncertain. The job cuts expect to trim €800 million in costs, in addition to improving the operating model, and to help the company become more lean, agile, and competitive.
Sales fell from €5.46 billion to €5.39 billion a year ago, while net income was down 85% from €524 million to €76 million. Net income per share dropped to €0.08 from €0.55. By 10.30am (London time), shares in Philips had recovered from their intraday low of €14.94 and were 3.18% higher at €15.27.
US pre-market
After ending last week’s session on a high, Wall Street was on track to open higher again this morning. US December futures were up almost 0.8% at 1229.30 for S&P 500 futures and 11,651.00 for Dow futures.
This afternoon, markets will pay attention to Empire manufacturing data released at 1.30pm (London time) and US industrial production and capacity utilisation figures released at 2.15pm (London time). Markets will also digest earnings reports from Citigroup and IBM.
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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"Financial Spread Betting Markets Rise on Optimism over EU Crisis Deal" last update by AG, 17-Oct-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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