FTSE 100 Spreads Rise on Positive Corporate Earnings
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 8 November 2011: 11.00am Update
In London the FTSE 100 was significantly higher this morning, bouncing back from yesterday's losses, as corporate earnings pushed shares higher. However, political developments in debt-laden Italy are likely to keep financial spread betting markets cautious as the government faces a crucial budget vote.
By 10.30am (London time) both the FTSE 100 and FTSE 250 were over 1% higher at 5580.16 and 10,414.48 respectively.
Eurozone political disorder
Markets will shift their attention on to Italy today where the Italian ten-year bond yield reached another euro-era high this morning, to 6.74%.
Silvio Berlusconi's coalition has been unravelling since contagion from the region's debt crisis led the country's bond yields to increase, prompting EU leaders and the European Central Bank to demand more austerity measures to balance the budget and spur growth.
Mr Berlusconi must show today whether he still has enough support in parliament to stay in power and implement austerity measures to trim the nation's debt.
The parliament will vote at 2.30pm (London time) on a routine report on last year's budget plan that will reveal whether or not Mr Berlusconi retains a majority in the 630-seat house. Should Mr Berlusconi fail to obtain 316 votes, he would probably face a confidence vote that will decide his fate.
Meanwhile in Athens, Greek leaders failed to meet a self-imposed deadline for appointing a new prime minister yesterday after talks with Lucas Papademos stalled. The talks are due to resume this morning with the aim of reaching a deal later today.
UK manufacturing and industrial output lacklustre
Data released this morning showed that industrial output flatlined in September, reinforcing the picture of lacklustre growth, despite a rise in manufacturing. Manufacturing output rose 0.2% in September after a 0.3% decline in August, and slightly above economists' forecasts for a reading of 0.1%.
Meanwhile, industrial output was flat on the month after a 0.3% gain in August, and below forecasts for a 0.1% rise. The drop in industrial output was primarily driven by falls in oil and gas extraction and utilities output.
Today's figures, in conjunction with last week's manufacturing PMI figures which showed manufacturing activity fell at its sharpest pace in over two years, do little to diminish fears that the economy is heading for another downturn.
Marks and Spencer's profits fall
Marks & Spencer (M&S) posted a 10% drop in first-half profit after second-quarter underlying sales fell for the first time in two years, underscoring the pressure on UK consumers.
Britain's biggest clothing retailer said this morning that it made a pre-tax profit of £315.2 million in the first three quarters of the year. The figure compares with a company consensus of £311 million and £348.6 million in the same period last year.
M&S said that the second half had started in line with its expectations but they remain cautious about the outlook and are well set up for the all important Christmas period. While retailers were hit by heavy snowfall last year, this year the increasing likelihood of a recession could also hamper sales.
Britons have been reining in spending as they fret about a stagnant housing market, job security and a fragile economic recovery. Shares in M&S, which have lost 18% of their value over the last six months, were up 3.07% at 336p this morning.
Lloyds posts nine-month loss
Lloyds Banking Group, the 41% nationalised lender which has been hit by the temporary absence of its CEO due to health issues, reported a nine-month loss and said it may have to put back some financial targets due to the economic turmoil.
Lloyds announced this morning that it made a loss of £3.86 billion after its earnings were hit by lower banking margins and higher funding costs. The bank had made a first-half loss of £3.25 billion, hit by compensation for customers mis-sold insurance products.
Despite the loss, shares in Lloyds were up a surprising 8.09% at 29.93p as the bank continued to shrink its balance sheet, in an effort to cut risk and make its stretched funding position more sustainable.
US pre-market
US futures are marginally higher this morning, with the Dow up 0.39% at 12,054.00 and the S&P 500 0.27% higher at 1260.90. US economic data is again notably absent today, with November economic optimism figures out at 3pm (London time) the only notable indicator.
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 8 November 2011: 4.15am Update
Across Asia, regional markets are mostly higher after picking up a strong lead from US markets.
Eurozone debt anxiety remains rampant after Italian yields spiked to a fourteen-year high of 6.67%. With the future of Italian Prime Minister Silvio Berlusconi in doubt, it seems financial spread betting markets are increasingly optimistic that a change of guard will result in Italy being better run. Investors want to see a leader who can implement the suggested reform programme.
The Nikkei is down 0.2%, with the exporters leading the declines. The Shanghai Composite is 0.3% higher, while the Hang Seng is the best performer in the region, with a 0.8% gain.
Australia
Australia's S&P/ASX 200 index is up 0.4% at 4290, after hitting a one-week high of 4301.5, following a 0.6% rise in the S&P 500 on expectations that Mr Berlusconi could resign.
The gains have come despite news that Australia’s trade surplus narrowed in September after export prices slipped. BHP Billiton is up 0.4%, Rio Tinto is 1.3% higher and the major banks are stronger between 0.8% and 2%. Westfield is up 0.8% after reaffirming its earnings guidance.
Europe
Turning to the European open and it looks as though we are likely to see green on screen on open. How risk assets like the FTSE or EUR/USD trade for the rest of the day, however, will be dictated by a number of key factors.
On the stock side, traders will be watching out for earnings from Vodafone, Lloyds, Marks and Spencer, Associated British Food and Intercontinental Hotels.
On the economic data side, UK industrial production is expected to see a modest rise of 0.1% in September, whilst German trade balance is expected to widen slightly to 12.5 billion euros. We don’t, however, anticipate this having a huge impact on the market.
The key event will be the upcoming vote on Italy’s budget balance, with suggestions that the opposition may request a confidence vote despite this passing.
Mr Berlusconi would almost certainly lose a confidence vote, which would open up the prospect of a new leader taking the reins, with a coalition government being formed. It seems the removal of this very colourful character would also be positive for risk assets and according to Reuters would see ten-year Italian yields fall 1% straight away.
Ahead of the open we're calling the FTSE up 29 at 5539, the DAX up 54 at 5982 and the CAC up 20 at 3123.
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 Rise on Positive Corporate Earnings" last update by AG, 08-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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