Financial Spread Betting Markets Tumble as Germany Opposes Eurobonds
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 25 November 2011: 11.00am Update
London saw no end to its losing run this morning, as the prospect of an endless Eurozone crisis caused investors to keep abandoning equities and other risky assets.
By 11am (London time), the FTSE 100 was down 0.85% at 5083.91, while the FTSE 250 was off by 1% at 9505.93. Both France and Germany were down 1%.
No rally yet for FTSE
The FTSE at present looks set for a tenth consecutive down day, with no end yet in sight. Spread betting investors seem to have gone from fear to frustration with the Eurozone debt crisis, with this farce looking like it will stretch into a third year.
Financial spread betting markets are now beginning to wake up to the awful prospect that Germany will not in fact 'pick up the tab' for the rest of the Eurozone, and will not permit either the introduction of jointly-issued eurobonds or an active programme of bond-buying by the European Central Bank.
Debt yields across the currency zone are on the rise, and even the most sanguine of individuals are beginning to wonder if we have actually entered the end game for the euro.
However, I still think this crisis will end, not with a bang, but with a whimper. Political paralysis (punctuated by the occasional Eurozone summit) will be the norm, as it has been for almost two years. At some point, one country will leave the euro, but whether this will herald a rush of departures is hard to say.
US shoppers get a head start
'Black Friday' starts in the US this afternoon, although millions of Americans cut short their Thanksgiving celebrations to start the Christmas shopping season ahead of schedule. The day is seen as setting the tone for the rest of the vital festive shopping period, when retailers hope that frenetic buying will allow them to break even.
This year is particularly important, given persistently high levels of unemployment and low levels of consumer confidence. Surveys indicate that sales will rise by between two and four percent this year, following on from a 5.2% increase to $452 billion in 2010, that helped to erase two consecutive years of declines.
Blacks Leisure slumps
Blacks Leisure may have enjoyed a small boost from having the Occupy London protesters outside its St Paul's branch, but the company is the latest retailer to see its shares fall precipitately on the back of a profit warning.
Blacks said that the outcome for the full year would be below expectations, hit by the usual suspects of low consumer spending and weak sentiment. For once the weather was not used as an excuse, unlike some other companies, which seem to have difficult trading whether it's warm or cold outside.
The shares fell 22% to 3.38p, down 91% from the level of 40p at which they started the year.
US pre-market
Our cousins in the US struggle back to work for a half day today, after indulging themselves on roast turkey and apple pie. There is no economic data scheduled for release this afternoon. Dow futures are currently down 83 points, with S&P 500 contracts 0.8% lower.
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 25 November 2011: 5.00am Update
It was a fairly quiet night with US markets closed for the Thanksgiving holiday, which resulted in consolidation in very thin markets. European markets were modestly weaker overnight after German Chancellor Angela Merkel said she remains opposed to joint euro bonds.
Despite surprisingly strong November German business confidence data, the Dax dropped 0.5% to end at 5428. The FTSE shed 0.2% to 5128 and the CAC was flat at 2822. This confirmed the ninth losing session in a row for European stocks.
Asia & Australia
Across Asia, regional markets are mostly weaker after losses for European markets overnight. US markets were closed for the Thanksgiving holiday, but European markets lost ground after German Chancellor Angela Merkel announced that she remains opposed to joint euro bonds.
There have been some developments in the Asian session after Japan released poor CPI data, which will be supportive of a loose monetary policy stance. The Nikkei is up 0.2%, the Hang Seng is 0.9% lower and the Shanghai Composite is relatively flat. The Aussie market is down 1.7% at 3976 after breaching psychological support at 4000.
Australia’s S&P/ASX 200 is on track for its sixth straight decline and has breached psychological support at 4000. The market is reacting to negative offshore developments in thin trading due to US Thanksgiving holidays. Many traders feel the Aussie spread betting market could bounce from current levels.
Energy stocks are leading the drop, after Woodside Petroleum shed over 8% following a disappointing investor update. Financial names are also struggling due to the ongoing European debt crisis.
The infotech sector is outperforming, aided by a 0.4% gain for Computershare. Steel stocks BlueScope and OneSteel are both stronger today after the recent sharp sell-off.
Looking ahead
Looking towards tonight’s session, US markets will return to trade after the Thanksgiving holiday and are facing a slightly weaker open after having missed yesterday’s session, which saw losses on the back of Angela Merkel’s comments. European markets are pointing towards modest losses on the open following the weakness we have seen in Asian markets.
We expect trade to remain subdued in the US with a half day of trade on the back of the Thanksgiving holiday. Europe will continue to be in focus after last night’s developments.
Last night was the first time since March 2009 that yields on ten-year bunds pushed above ten-year gilts, suggesting if you want to keep your capital protected from further European fallout you go to the ‘safe-haven’ of UK government bonds.
One has to think that with no backstop in place, with the exception of ECB buying, sovereign bonds and risk FX have further downside in the short to medium term. The question traders are asking, however, is how much higher do borrowing costs (yields) have to rise and risk assets fall before price stability becomes an issue for the ECB?
As it stands, liquidity is drying up and funding costs are getting more expensive. The situation threatens to really spiral out of control. Tonight Italy will auction EUR8 billion of six-month bills ahead of next week’s EUR8 billion bond auction. Another poorly participated auction would see the EUR/USD spreads coming under renewed selling pressure.
There is no major economic data in the UK today. Ahead of the European open we're calling the FTSE down 15 at 5113, the DAX flat at 5428 and the CAC down 7 at 2815.
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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"Financial Spread Betting Markets Tumble as Germany Opposes Eurobonds" last update by AG, 25-Nov-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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