FTSE Spreads Rise Ahead of Bank of England Interest Rate Decision
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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 December 2011: 11.00am Update
European indices were marginally higher this morning ahead of interest-rate decisions from the Bank of England and European Central bank, though gains were capped after ratings agency Standard & Poor's warned it could now cut the EU's coveted triple-A rating.
By 10.30am (London time) the FTSE 100 was up 0.29% at 5562.75 while the broader FSTE 250 was down 0.52% at 10,226.25. In continental Europe markets were approximately 0.4% higher.
Central Banks eyed
Today the European Central Bank (ECB) will meet before the 'make-or-break' EU summit where EU leaders hope to agree on key rule changes to anchor coercive budget discipline for the Eurozone region.
At today's monetary meeting, the ECB is widely expected to cut interest rates by 25 basis points for the second month running, bringing the rate back to the record low of 1% that it reached during the financial crisis in 2009. Spread betting markets are also expecting the central bank to lower its growth forecasts.
Intense focus will also be on what the ECB signals it is prepared to do regarding its bond purchases. Last week ECB president Mario Draghi signalled the bank could take stronger action if European leaders agree on tighter budget controls at tomorrow's summit.
The ECB press conference is scheduled for 1.30pm (London time) today. The Bank of England announce their rate decision at midday.
Standard & Poor's piles on the pressure
Following Monday' s announcement from Standard & Poor's which said it had placed 15 of the 17 Eurozone countries on review for a downgrade, the agency further warned last night that it could cut the credit ratings of the EU and large Eurozone banks if a mass downgrade of Eurozone countries materialises.
The agency warned earlier in the week that it may downgrade nearly all of the 15 Eurozone countries if EU leaders fail to agree on a solution for the region's debt crisis during tomorrow's summit.
Last night Standard & Poor's placed the EU's triple-A credit rating on credit watch negative, noting that Eurozone members contributed about 62% of the EU's total budgeted revenues in 2011. The decision adds to the already mounting pressure on policymakers to find a solution to the debt crisis quickly.
Mulberry profit trebles
British luxury fashion brand and maker of leather handbags, Mulberry, said this morning that its first-half profit for this year had more than trebled with the help of global expansion.
However it said it was cautiously optimistic about the future while acknowledging the challenging economic climate. The designer posted a pre-tax profit of £15.6 million in the six months to 30 September, up 231%, while revenue rose by 62% to £72.3 million and wholesale shipments grew by 93%.
The company further announced in its statement that the outlook for the second half of their financial year, up to 31 March 2012, is positive although the potential impact of the economic environment on consumers' spending habits makes the future more challenging.
The company also said it plans to open nine new stores in the second half and plans to expand further in Japan. In June it said it expected overseas sales to overtake those in its home market, predicting particularly strong demand from the Asian label lovers.
Shares in Mulberry, which have risen more than 60% this year, jumped 3.61% this morning to a high of 1548p.
US pre-market
US futures were pointing to a marginally lower open on Wall Street this afternoon. S&P 500 futures point to the index opening 0.11% lower while Dow futures are 0.17% down.
Looking ahead this afternoon, the US will release weekly jobs data at 1.30pm followed by the consumer comfort index at 2.45pm and wholesale inventories at 3pm (all 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 8 December 2011: 5.00am Update
US markets extended their gains overnight in a choppy session, as traders tried to position themselves ahead of the key European summit.
Reports out of Europe continue to dominate trade, with plenty of headlines to digest. A report suggesting the G20 is considering a $600 billion IMF lending program saw US markets charge higher late in the session. The IMF has since denied the report, however, which resulted in US stocks retreating in the last moments of trade.
Among the major averages, the Dow Jones Industrial Average climbed 0.4% to 12,196. The S&P added 0.2% to 1261, while the NASDAQ was flat at 2649. European markets were mostly weaker, however, as indices spread betting investors grew increasingly pessimistic about the debt crisis.
Asia & Australia
Regional markets are also weaker across Asia, as investors tread cautiously ahead of this week’s key meetings in Europe. A report suggesting the G-20 is considering a $600 billion IMF lending program saw US markets charge higher late in the session.
However, the IMF has since denied the report, which resulted in US stocks retreating in the last moments of trade. The lack of concrete proposals leading up to the summit has left investors growing increasingly pessimistic.
The Nikkei is the worst performer in the region with a 1.1% drop, while the Hang Seng is down around 0.9% and the Shanghai Composite is flat. The ASX 200 is down 0.2%.
Despite the weakness we are seeing in the Asian region, US and European markets are pointing towards modest gains on the open after having lost ground overnight, and in anticipation of an ECB rate cut.
Australia's S&P/ASX 200 index is down at 4285, with most sectors struggling. Pessimism is growing over the European situation. There has been no confirmation of the plans which have supposedly been discussed, and officials have denied some of the reports that lifted Wall Street this week, so it's hard for spread betting investors to be confident.
Energy stocks are weakest, with Woodside Petroleum down 2% and Santos 3.6% lower. Consumer discretionary stocks are mostly underperforming, with David Jones 2% softer and Harvey Norman 1.2% weaker. Industrials are outperforming, with Brambles up 2.2% and Qantas 0.6% higher.
Iluka has risen 6% after flagging higher prices, while Newcrest is 1.3% stronger after recent weakness. Among the big banks, National Australia Bank is the only one in positive territory, with a 0.4% gain. Domestic jobs data released this morning disappointed, missing expectations and resulting in a sharp sell off for the Aussie dollar.
Europe
Tonight will be the start of what promises to be a volatile yet fascinating journey for the European single currency. The swaps market is pricing in an 89% chance of a cut, which is perhaps a touch conservative in our eyes.
Given we feel there are risks, we could even see 50 basis points being cut off the refinancing rate, but the real action will probably come when traders dissect the ECB’s statement.
Traders will be keen to hear the ECB’s assessment on price stability, but also its staff projection for 2012, to which we would not rule out a sizable downward revision from the 1.3% GDP growth.
There is also talk of providing more support to the banks in the shape of longer-term loans of up to three years, while also loosening collateral requirements for future loans. The journalist community will be fishing for clues on the future of the ECB’s bond-buying program in the post-statement Q&A session, and many will be focusing on QE.
That said, given many members of the ECB have been outspoken about their distaste for unsterilised asset purchases, we expect the ECB will simply maintain its existing stance of ‘passive containment’ here. As mentioned, there are many highlighting that the next few days are pivotal, not just for the fortunes or sovereigns, but for the entire banking system.
In the UK, traders will be looking out for asset purchase facility numbers, the official bank rate and the MPC rate statement. Ahead of the European open we're calling the FTSE up 29 at 5576, the DAX up 64 at 6059 and the CAC up 36 at 3212.
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 Spreads Rise Ahead of Bank of England Interest Rate Decision" last update by AG, 08-Dec-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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