FTSE 100 Spread Betting Market Rally Curbed Ahead of US NFP
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 7 October 2011: 11.00am Update
The FTSE 100’s strong rally finally petered out on Friday morning, as spread betting investors paused for breath after an impressive run up during the past two days. Caution prevailed ahead of the all-important US jobs report this afternoon.
By 10.45am (London time), the FTSE 100 was down 0.35% at 5272.71, while the FTSE 250 shed 0.32% to 9857.23.
Moody’s strikes again
The UK banking sector fell this morning following news that Moody’s had cut its credit ratings for some of the country’s financial institutions. Moody’s slashed the rating for RBS by two notches, from AA3 to A2, while Lloyds was reduced to AA3 to A1.
The agency said that the decision had been based on the decreased likelihood that the British government would provide support to the banking sector. However, there is also nervousness about a new round of bailouts for RBS if a Europe-wide recapitalisation programme is undertaken.
RBS’ core tier one capital ratio, an important measure of financial strength, is insufficiently high, once Eurozone periphery write-downs are taken into account.
All five major UK banks were down, with Lloyds down 3.4% at 34.67p, RBS losing 3.5% at 23.5p, and Barclays 2.77% lower at 163p. HSBC and Standard Chartered suffered less, due to the fact that they are less connected to the Eurozone crisis.
Franco-German axis looking precarious
Berlin and Paris appear to be falling out over the possibility of a Greek default. France continues to resist moves to allow Athens to default, while Germany is keen on ensuring that any default is carefully managed.
In part, this is because France has a far larger exposure to Greek debt and could see its AAA rating hit if Athens does eventually run out of money. In addition, Germany is unwilling to stump up yet more cash, being the largest contributor to the bailouts of Greece, Ireland and Portugal.
Time is running out for any Eurozone solution, and both the US and China are becoming increasingly exasperated with Europe for its apparent lack of progress. Markets have rallied this week on hopes of a solution, but things could turn ugly again if investors suspect renewed dithering by Eurozone leaders.
Premier Foods gets itself into a pickle
Over the past few days we have been treated to a number of profit warnings from UK companies. Today saw Premier Foods take its turn in the spotlight, with the shares slumping 34% to 6.6p after the company said that full-year profits would be below expectations.
Premier, which includes such classic brands as Sharwoods, Smash, Mr Kipling and Bisto, said that trading had been disappointing, while market share had also declined.
Salvation appears to be at hand however, as the company plans to improve its position by ‘strengthening sales’ (which would seem to be a sensible place to start) as well as undertaking more business disposals.
US pre-market
At present, US futures are down 0.3% for the Dow Jones and 0.15% for the S&P 500. The big event of the day is the monthly non-farm payrolls report for September.
Current forecasts expect the US to have added 55,000 jobs last month, which would be an improvement on August’s big round zero. Also look out for any revision to the August number, which could show that the US economy actually lost jobs for the first time since September 2010. The unemployment rate is forecast to remain unchanged at 9.1%.
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 7 October 2011: 6.00am Update
Overnight, US stocks finished near their session highs, capping a third straight day of gains.
This occurred as investors welcomed new liquidity measures announced by the ECB and grew in confidence that European leaders were serious about recapitalising the region’s most vulnerable banks.
Spread betting markets rallied into the close, despite some nerves ahead of the highly anticipated non-farm payrolls report.
Among the major averages, the Dow Jones Industrial Average added 1.7% to end at 11,123, the S&P jumped 1.8% to 1164, while the NASDAQ surged 1.9% to 2506. All S&P sectors finished higher, led by advances in materials and financial names.
Asia & Australia
Across Asia, regional markets are all significantly higher after US markets stretched their rally into a third consecutive day. The Hang Seng and the Kospi are seeing gains of 2.8% and 2.6% respectively, while the Nikkei 225 is enjoying a more modest advance of 1.1%. The Shanghai Composite is closed.
In Australia, the ASX 200 is currently 2.1% firmer at 4157, well off its earlier high of 4180. After another session of healthy gains in offshore markets it is not surprising to see the Australian market building on yesterday’s strength.
Gains for the day are broad-based, with all sectors in positive territory. The biggest advances are coming from the materials, energy and financial sectors which have been heavily sold down over the last month.
The bulls are back
Equity markets are continuing to march higher as we move toward the weekend break, spurred on by a whole raft of data points.
The economic news out of the US in recent days has had a distinctly non-recessionary theme to it - clearly something that is placating traders' concerns - whilst yesterday's liquidity measures from the ECB threw the ailing Eurozone banks an invaluable lifeline.
Finally, add in the UK's uplift in the asset purchase program and it's perhaps no surprise that the bulls are back in the driving seat, at least for now.
The focus should probably lie more on the improved economic data as opposed to the central bank interventions. This is going to make the non-farm payrolls which are due for release later today even more critical.
With markets sporting some healthy gains over recent days, any disappointment could easily have traders scrambling to book profits. German industrial production and UK PPI are also both on the economic calendar today, but corporate news is looking rather more lacklustre, with the Q2 production report from Vedanta Resources likely to be the stand-out piece for the day.
Ahead of the open we're calling the up 33 at FTSE 5324 the DAX up 29 at 5674 and the CAC up 11 at 3086.
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 Rally Curbed Ahead of US NFP" last update by AG, 07-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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