FTSE 100 Spread Betting Market Rallies after US Intererst Rate Comment
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 26 January 2011: 11.30am Update
The Fed’s decision to keep interest rates low for at least another two years while signalling the possibility of further QE reinstated the rally on the FTSE 100, which surged as much as 1.3% to reach 5797.79 today.
The Fed’s indication that it is willing to do whatever it takes to boost the economic recovery was well received by the markets, especially resource shares. The Fed may indulge in a third round of quantitative easing as soon as April.
Elsewhere, easyJet, Europe’s second-biggest discount carrier, declared higher revenues than expected in the last quarter due a milder winter and higher bookings by business travellers. The airline’s revenue surged 17% to £763 million in the quarter ended 31 December.
The surge in risk appetite benefited Italian bonds as well today, which came down by 12 points for the five-year notes and 11 points for the two-year note.
UK retail sales
The balance for reported sales volumes from the Confederation of British Industry’s distributive trades survey fell to -22 from +9 in December.
The latest reading is the lowest in three years, and indicates that shoppers have reined in spending after taking advantage of early discounting last month.
Looking ahead
Looking ahead to the US, futures suggest that Wall Street will kick off in positive territory today.
Investors will also be keeping a close eye out for the initial jobless claims, durable goods orders and new home sales.
The data should set the tone for trading, with durable goods orders expected to rise on the back of increased demand from China and improvement in US manufacturing.
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 26 January 2012: 6.30am Update
European stock market indices look destined to open with gusto thanks to the Federal Reserve and its commitment to keep rates low through late 2014, effectively a year and a half more than previously forecast.
The fact that it is now targeting a slightly higher level of PCE (personal consumption expenditure) of 2%, higher than the previous informal range of 1.7% to 2%, was also interesting. However, the price action in gold, equities and of course the USD suggests that QE3 is smack in the middle of the markets crosshairs.
The adjustment in the Fed’s statement from the committee previously suggesting it was prepared to ‘employ its tools’ has been upgraded to now saying it could ‘adjust’ its security holdings ‘to promote a stronger economic recovery’.
In addition, detailing bond buying is ‘an option that’s certainly on the table’. This has got everyone talking about QE3 becoming a distinct possibility.
Greek Debt
It was interesting to see a number of articles suggesting the ECB could take haircuts on its holdings of Greek debt, which by accounts, stands around €22 billion. Although this has been rejected by German politicians, it seems to be getting an increasing amount of attention.
Perhaps for Greece to be put on a serious path of debt sustainability, this would be a step that needs to happen, although it would not do the ECB’s fiscal position any good.
It also seems that while Greece has been front and centre of late, those more forward-thinking traders are focusing on Portugal and the ever increasing yields and CDS spreads.
The immediate future of Portugal is secured by the EFSF, however it seems it is struggling to meet its commitments, and like Greece may soon be shut out of the secondary debt markets. At that point it will require bailout after bailout, another case in point of kicking the can down the road.
Looking Ahead
There is not much for traders to sink their teeth in to today with US durable goods and initial jobless claims being the economic data highlight.
Italy will look to tap the markets for €4.5 billion in two-year zero coupon bonds and €500 million in two-year index linked bonds, neither of these should rock the risk boat too much.
Caterpillar and 3M are the key note US stocks to report, and it is worth remembering that Caterpillar has beaten EPS consensus ten out of the last eleven quarters. Its views on Asian demand, as well as the general macro picture, could inspire buying in other risk assets.
Ahead of the open we are calling the FTSE at 5747 +24, the DAX at 6457 +35 and the CAC at 3334 +21
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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"FTSE 100 Spread Betting Market Rallies after US Intererst Rate Comment" last update by AG, 26-Jan-2012
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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