German GDP Spooks Wall Street as Spread Betting Markets Fall
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 17 August 2011: 11.15am Update
European markets continued to slip this morning following yesterday’s Franco-German summit, which disappointed investors who were looking for more radical measures to help the Eurozone’s debt crisis.
The FTSE 100 dropped to 5279.93 this morning, while the broader FTSE 250 fell to 10,303.18 after UK data released this morning showed that the country’s economy continues to struggle.
‘Merkozy’ measures disappoint
The measures outlined by Mr Sarkozy and Ms Merkel to help the Eurozone debt crisis fell short of market expectations. Among these was a commitment to push for an EU-wide financial transactions tax and a new Eurozone president to be in power for 2.5 years.
The pair proposed that European Commission president Herman Van Rompuy be the first such president. Additional proposals put through included EU members having to oblige their governments to set targets for a more balanced budget, and for more power to be given to the European Commission.
These proposals will be included in a letter to be sent to Van Rompuy today.
The pair also announced that increasing the size of the Eurozone EFSF fund to bail out weaker countries was not on the cards and that euro bonds were not an option right now.
UK unemployment rises
Adding to the streak of poor data, the UK saw jobless claims post their largest jump in over two years, piling on pressure for the government to boost the struggling economy. Jobless claims benefits in July rose by 37,100, well above economists' forecast of a rise by 20,000.
The rising unemployment rate is also likely to further dent consumer morale, which was hit by high inflation figures yesterday. The jobless rate unexpectedly rose to 7.9%, compared with forecasts for an unchanged reading of 7.7%. Excluding bonuses, wages increased by 2.2%, well below the inflation figure of 4.4%.
The Bank of England is due to release the minutes of their latest meeting today. Financial spread betting markets will pay close attention to any mention of a second round of quantitative easing, which could boost the struggling economy.
Swiss franc rallies
Worries over the global economy and debt in the Eurozone and the US have prompted investors to move into the safe-haven currency of the Swiss franc, which has rallied 20% against the euro and the US dollar in recent months.
Today, the Swiss National Bank made fresh efforts to tame the strengthening Swiss franc, which boosted it by as much as 2% against the euro.
The SNB had already intervened in its currency earlier on in the month by slashing the interest rate lower to virtually zero. Today the bank announced it would further boost liquidity by expanding sight deposits to 200 billion Swiss francs from 120 billion francs, and would, if necessary, introduce further measures.
The Swiss cabinet may hold a press conference later today or tomorrow to discuss the impact the strong currency is having.
SABMiller’s takeover bid for Foster’s continues to brew
SABMiller’s bid for Australian brewer Foster's turned hostile when they made a conditional, off-market cash offer to shareholders at the same price that Foster's’ board rejected in June.
SAB Miller is offering A$4.90 a share for Foster’s at a total price of A$9.5 billion. In a statement released today, SABMiller said ‘the proposal put to the Foster's board is attractive and should be put to Foster's shareholders’.
Foster's has been viewed as an attractive takeover target due to its leading position in Australia's beer market, which has suggested that the company could attract multiple bidders.
However, still no other bidders had yet gone public. By 10am (London time), SABMiller’s shares were up 0.83% to 2135.5p, and Foster’s shares were 0.61% higher at the end of trading in Australia at $4.96.
US pre-market
Both the S&P 500 and Dow Jones Industrial Average futures were 0.7% higher at 1,193.10 and 11,395.00 respectively this morning, pointing to a slightly higher open on Wall Street this afternoon.
US PPI data will be released at 1.30pm (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 17 August 2011: 6.00am Update
In the US overnight, stocks snapped their recent winning streak as the shares spread betting market was disappointed by the comments from President Nicolas Sarkozy and Chancellor Angela Merkel, as well as weaker-than-expected GDP growth from the EU and Germany.
Nonetheless, the major indices did manage to rally significantly from their lows, which was encouraging. The NASDAQ was the worst performer - down 1.2% - while the S&P 500 and Dow Jones Industrial Average fell 1% and 0.7% respectively.
Asia & Australia
Across Asia, regional markets are mixed as traders remained cautious, following the weaker leads from Wall Street and the disappointment from the meeting between President Sarkozy and Chancellor Merkel. The Hang Seng and Kospi are 0.8% and 0.1% firmer, while the Shanghai Composite is flat, and the Nikkei 225 is 0.8% weaker.
In Australia, the ASX 200 is currently 1.2% firmer at 4301, just off its earlier highs of 4311. Earlier modest gains have given way to heavier buying interest, with equity markets surging on rumours that President Obama will unveil a very specific plan to boost the economy, create jobs and control the deficit by mid September.
Gains for the day are broad-based, with the information technology and consumer staples sectors the biggest percentage gainers, while the heavyweight industrial, financial and energy sectors are all higher by more than 1%. The materials sector is seeing a more modest advance of 0.7%.
Europe
Yesterday’s German GDP data - combined with the lack of any meaningful output from the Merkel-Sarkozy meeting - seems to have spooked traders on Wall Street, leaving the major US indices to finish Tuesday's session squarely in negative territory.
The sentiment hasn't quite carried over into Asia, though we’re seeing a mixed bag across the region so far. With confidence seemingly rocked once again, more losses are expected when the European markets come on line.
Regardless of any talk of the bulls moving back in - or even just a degree of bargain hunting at what are still low levels for many stocks - this move is a clear reminder that many market participants remain jittery.
This is unlikely to change in the near term. The first of the US inflation readings is due later today, and we can expect this to be closely watched. Any marked variation here could raise expectations that the world's largest economy is on course to slip back into recession.
Bank of England meeting minutes, UK unemployment data and Rurozone CPI will further boost the fundamentals. Earnings news is looking rather quiet, with highlights including interims from Carlsberg, ENRC and US retailer Target.
Ahead of the open we're calling the FTSE down 25 at 5333, the DAX down 45 at 5950 and the CAC down 2 at 3229.
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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"German GDP Spooks Wall Street as Spread Betting Markets Fall" last update by AG, 17-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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