FTSE 100 Spreads Higher on Better Than Expected European Economic Data
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 24 November 2011: 11.00am Update
A string of better-than-expected economic data helped European markets slightly higher this morning, though gains could be capped as fears grow that the Eurozone debt crisis now involves Germany.
By 10.30am (London time) the FTSE 100 had erased earlier gains and was 0.35% higher at 5157.62, while the FTSE 250 was up 61.09 points to 9629.87. In Europe, the DAX was over 1% higher at 5532.47, and the Italian FTSE MIB was up 1.62%.
All eyes on Germany
Economic data released from Germany today showed that growth in Europe's largest economy accelerated as spending increased, even with the region's worsening debt crisis.
German private consumption expanded by 0.8% from the second quarter, while GDP advanced by 0.5% from the previous three months, accelerating from the 0.3% growth recorded in the second quarter.
Separately, German business confidence unexpectedly rose for the first time in five months in November, defying Europe's worsening debt crisis. The business climate index increased to 106.6 from 106.4 in October after economists expected a decline to 105.2.
Meanwhile, Italian consumer confidence unexpectedly rose in November even as austerity measures and Europe's debt crisis sparked concern that the economy may slip into a recession. The sentiment index increased to 96.5 from a revised 93.3 in October.
Despite today's data, concerns that the turmoil is starting to affect Germany, Europe's largest economy, will likely weigh on equities after yesterday's bond auction fell 39% short of the €6 billion on offer. German ten-year bond yields jumped to 2.25% this morning.
UK Q3 growth confirmed
Britain's economy grew by 0.5% in the third quarter of this year, in line with previous estimates, but the expansion was largely driven by an increase in firms' inventories. Inventory growth added 0.7% to GDP on its own in the third quarter, though household consumption was flat.
The figures mark a rebound from weak growth in the second quarter, which was attributed in part to disruption from the extra public holidays to mark the royal wedding, as well as the impact from Japan's tsunami which hit supply chains.
Though this was the fastest pace of growth since the third quarter of last year, economists are still expecting that economic expansion is likely to slow rapidly, and the feeling is that the nation is heading towards another recession.
The Bank of England has forecast that the economy will stagnate in the last three months of this year, and grow at an annual rate of 0.8% though 2012.
More bad news for the UK high street
Dixons, Europe's second-largest electrical goods retailer and home to the Currys and PC World, posted a wider first-half loss than expected as cash-strapped shoppers cut back on purchases of discretionary goods.
However the company did say it was taking market share from rivals. The group announced it made a pre-tax loss of £25.3 million in the 24 weeks to 15 October, compared with a loss of £6.9 million at the same time last year.
Dixons, which also runs shops in Italy, Greece and the Nordic countries, has outperformed rivals thanks to a store revamp programme focused on more popular megastores.
The outperformance comes despite shoppers across Europe reducing spending on discretionary items as their disposable incomes are squeezed by rising prices, muted wages growth and government austerity measures. Shares jumped over 10% this morning to 10.58p.
Elsewhere in spread betting news, Arcadia (owners of Topshop and BHS) added to the bad news from the high street by posting a 38% fall in annual profit and a further deterioration in recent trading, as mild weather deterred winter clothing purchases.
The company announced it made a pre-tax profit of £133.1 million in the year to 27 August, down from £213.2 million the previous year, with total sales falling 3.4%.
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 24 November 2011: 5.00am Update
Global markets extended their losses overnight on deepening concerns about the European debt crisis, after a poorly-received German debt sale.
Germany failed to find buyers for 35% of the bonds it offered at an auction. There was also a swathe of disappointing economic data, with European services and manufacturing output shrinking for a third month, US durable goods orders falling and unemployment claims topping forecasts.
Among the major averages the Dow Jones Industrial Average lost 2.1% to end at 11,258. The S&P dropped 2.2% to 1162 and the Nasdaq was down 2.4% to close at 2460. US markets are closed for the Thanksgiving holiday.
Asia & Australia
Across Asia, regional markets are mostly weaker after a broad sell-off in global markets overnight. Deepening concerns about the European debt crisis continue to weigh on markets after a poorly-received German debt sale. Japan has returned to trade today after yesterday’s holiday.
As a result, the Nikkei is the worst performer in the region as it catches up to some of the losses logged in the Asian district yesterday. However, markets in the region have pared losses and are well off their lows. The Nikkei is down 1.4%, the Hang Seng is 0.7% higher and the Shanghai Composite is relatively flat.
The Aussie market is up 0.2% on the back of strength in the resource heavyweights and the big banks.
Looking ahead today, US markets are closed for the Thanksgiving holiday. European markets are now pointing towards gains on the open following the recovery we have seen in the Asian session. After eight consecutive negative sessions in European spread betting markets, we might finally see a bounce.
Australia’s S&P/ASX 200 is 0.2% higher at 4058 despite bearish offshore leads. The market printed a seven-week low of 4029.5, but has since recovered as indices spread betting investors start to seek value in high yielding stocks.
Gains in large-cap stocks are supporting the market, with financial names leading the charge. All the big four banks are stronger, with Commonwealth Bank the best performer, up 1%.
Mining heavyweights BHP Billiton and Rio Tinto are also trekking higher despite a poor night in the commodities space. Woodside Petroleum, Westfield and Newscorp have all gained ground. Murchison Metals has jumped 50% after announcing some asset sales. David Jones is trading lower after its quarterly sales update failed to impress.
There is also weakness in the healthcare and utilities space. It seems some funds are switching from the defensives to the cyclical plays.
Today brings UK revised GDP and preliminary business investment data. However, focus will still be on European PMI figures which showed that Europe is heading into recession and came out below the expectations of the market. Germany will also be in focus after yesterday’s poor bund auction.
Ahead of the European open we're calling the FTSE up 15 at 5155, the DAX up 29 at 5487 and the CAC up 13 at 2835.
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 Spreads Higher on Better Than Expected European Economic Data" last update by AG, 24-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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