FTSE Share Spread Betting Market Falls Ahead of US Fed President Speech
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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 August 2011: 11.00am Update
The FTSE 100 opened in the red this morning, continuing yesterday afternoon's declines, as traders turned their attention to today's speech by Ben Bernanke.
Expectations are running high, but caution is likely to predominate until the chairman begins his speech.
Shares spread betting investors remain transfixed by this afternoon's speech by Fed chairman Ben Bernanke. Expectations have been evolving all week, with a rally in the first three days undone by declines yesterday.
Stocks are lower this morning as caution grips markets, with participants understandably nervous about shifting positions in advance of today's speech.
By 10.30am (London time), the FTSE 100 was down 0.47% at 5107.14, while the FTSE 250 had lost 0.35% to 9986.59.
Hawk becomes dove
One of the hawks on the Monetary Policy Committee has undergone something of a Damascene conversion.
Martin Weale, who had been one of the three members advocating a hike in interest rates earlier this year, had already shifted his stance on tighter monetary policy, and has now said that the UK economy may require a further round of asset purchases.
He noted that a weakening of inflationary pressures would suggest more monetary easing was required, beyond the £200 billion of purchases carried out by the Bank of England (BoE) during the financial crisis.
Such a rapid change of heart is an indication of how the recent market turmoil has spooked central bank officials, and it will be interesting to see whether Mr Weale joins with arch-dove Adam Posen in advocating further stimulus at the next policy meeting of the BoE.
Europeans extend short-selling ban
European states have decided to continue their King Canute routine, extending their shorting ban beyond today's expiration date.
France, Spain, Italy and Belgium have decided to continue to ban the short-selling of financial stocks, since market volatility has not yet subsided. Regulators said that they would review the ban at the end of September.
Rumours emerged last night that Germany was also considering a ban, but this was rapidly denied by Berlin. Liquidity in shares covered by the ban has reduced somewhat, but is still around three-quarters of the average before the spike in selling of financial stocks in early August.
UK banks slip after rally
After surging yesterday on news of Warren Buffett's support for Bank of America, UK banks are lower this morning as events in Europe and the US keep investors on edge.
Greece revealed last night that it activated a last-ditch liquidity package to avert a crisis, a move which sent German stocks into a downward plunge. Finland continues to defy Berlin over the provision of collateral for more bailout loans, and the signs are that the Eurozone crisis could rapidly explode back onto the scene quite soon.
Lloyds fell 2.7% to 30p, while Barclays and RBS both shed 1.7%.
Mixed quarter for Stobart
All eyes may be on the Federal Reserve, but there are still companies reporting results. Transport firm Stobart Group fell 1.8% to 130p after it reported some difficult trading in June and July. Shipment volume fluctuated during the period, but improved in August, and the company expects the first half of the year will see an overall increase in pre-tax profit.
US pre-market
US September futures are slightly higher at present, with those for the Dow Jones up 0.04% and the S&P 500 0.2% higher.
As well as Bernanke's speech at 3pm (London time), investors should watch out for US second-quarter GDP data at 1.30pm, and consumer confidence at 2.55pm (both London time).
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 August 2011: 6.30am Update
Markets fell in the US overnight, snapping their three-day winning streak, as investors remained cautious ahead of Ben Bernanke’s speech at this weekend’s Jackson Hole Symposium amid further volatility in the Eurozone.
The technology-laden NASDAQ was the biggest decliner - losing 2% - while the S&P 500 and Dow Jones Industrial Average fell 1.6% and 1.5% respectively.
Asia & Australia
Across Asia, regional markets are all lower following the weak overnight leads from the US. Traders are displaying caution ahead of tonight’s crucial speech from Federal Reserve Chairman Ben Bernanke. The Shanghai Composite is the biggest decliner - down 0.8% - while the Kospi, Nikkei 225 and Hang Seng are all down between 0.1% and 0.2%.
In Australia, the ASX 200 is 0.2% lower at 4202, just off earlier lows of 4197.8. Apart from modest gains among utilities and consumer discretionary names, all other sectors are seeing modest declines as traders look to lock in profits for the week ahead of this weekend’s Jackson Hole Symposium.
The market is up more than 2% for the week so it’s hardly surprising at all that we’re seeing some profit taking ahead of such a key event. Given the recent volatility, traders are very reluctant to hold positions over events that have the potential to trigger huge volatility.
The week is certainly on course to finish with some volatility, with a notable degree of selling being seen on both sides of the Atlantic by last night's respective closes.
The Federal Reserve retreat
Ben Bernanke is addressing the Federal Reserve's annual summer retreat at Jackson Hole and there's a widespread belief that, with further intervention seemingly required to keep the US economy moving along, some solid indications will be included here.
Perhaps most important of all is the fact that the indices spread betting market appears to have priced in such news already, so any failure to deliver risks initiating another bout of selling in the short term.
Add to this the fact that we have GDP updates due from both the UK and US, plus the latest University of Michigan confidence data and there's scope for some real volatility to be seen in the hours ahead.
It's also worth adding that with the UK facing a holiday weekend plus that short sell restriction set to come off a number of Eurozone banks on Monday, again there's going to be potential to see further de-risking of portfolios.
Ahead of the open we're calling the FTSE up 4 at 5135, the DAX down 30 at 5554 and the CAC down 10 at 3109.
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 Share Spread Betting Market Falls Ahead of US Fed President Speech" last update by AG, 26-Aug-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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