Gold Spread Betting Market Rises as Economic Concerns Spur Risk Aversion
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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 October 2011: 11.00am Update
The FTSE 100 remained in a fairly narrow band of trading this morning as spread betting investors awaited developments from the all-important Eurozone summit taking place today. With so much apparently riding on the outcome, traders will be erring on the side of caution before news emerges.
By 10.45am (London time), the FTSE 100 was up 0.16% at 5534.26, but the FTSE 250 had fallen 0.36% to 10,390.54. The AIM All-Share index lost 0.13% to reach 713.99.
Europe expects
Marathon, Tours, the Council of Trent, the Treaty of Westphalia, the storming of the Bastille and the fall of the Berlin Wall. Today's Eurozone summit might join this list of famous European dates if EU politicians summon up the will to make real progress on solving the debt crisis.
The meeting was widely-trailed in recent weeks as the final deadline for rescuing the ailing single currency, but in the past few days a degree of caution has crept in, as traders hope and fear (depending on their positions) that the EU will allow the moment to pass without doing anything to improve the situation.
Key points to be covered today include a new austerity programme for Italy, a bank recapitalisation effort and a decision on the amount of haircuts to be suffered by Greek bondholders.
Silvio Berlusconi, the charismatic Italian PM, is supposed to arrive at the meeting with a package of measures that will help restore competitiveness and cut back on public spending on the Apennine peninsula.
It seems that he has been able to strike a deal with his coalition allies, the Northern League, with changes to pension ages and entitlements being passed in return for a commitment from the colourful Mr Berlusconi to step down in January 2012.
Like a recalcitrant schoolboy, Mr Berlusconi now travels to Brussels to see if his homework lives up to the standard expected by Ms Merkel.
As is to be expected, the turmoil in the Eurozone is not helping bank stocks this morning. Only HSBC remained in positive territory, up 0.02%, while Barclays fell 0.9% to 178.3p and Lloyds dropped 1.36% to 34.5p.
Mining shares were more mixed, but gold miners Randgold and African Barrick both put on solid gains, helped by yesterday's big move in the price of gold, which pushed back above $1700 per ounce for the first time since late September.
BAT holds its ground
Cigarette volumes declined slightly at British American Tobacco during the first nine months of its financial year, but the firm was still able to increase its market share.
BAT did warn that the economic environment remained challenging, but there was still growth in Eastern Europe, as well as the Middle East and Africa. Shares in the company rose 0.56% to 2868.5p, and are now up 16.5% so far this year.
Stobart keeps trucking
Transport group Stobart managed to lift underlying pre-tax profit by 6.5% to £16.4 million, while revenue grew by 15% to £281 million for the six months to 31 August. Stobart was able to reduce net borrowing to £38.6 million, from £111 million at the end of February.
It added that, despite the difficult outlook, it still expected to meet its targets for the full year. Nonetheless, the shares were still down 4.4% at 120.35p.
US pre-market
US futures are pointing towards a higher open for Wall Street, following last night's heavy falls, but they have dropped back from the highs seen earlier this morning. Dow futures are 0.46% higher while S&P 500 contracts are up 0.52%.
While the main news of the day remains the EU summit, we also have September durable goods orders at 1.30pm and new home sales at 3pm (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 October 2011: 6.00am Update
Global markets gave back some of their recent gains last night on deepening concerns over the ability of European leaders to resolve the debt crisis.
The crisis seems to be deepening following a cancellation of the EU finance ministers’ meeting. In economic news, consumer confidence in the US disappointed and home prices stagnated. The Consumer Confidence index unexpectedly plunged to 39.8 in October, down from 46.4. The market was looking for basically a flat reading of 46.0.
US markets halted their three-day win streak on further concerns about the economic outlook and some disappointing earnings reports. With risk once again out of favour, gold spread betting prices emerged as the victor, posting a 2.7% gain.
Among the major averages, the Dow Jones Industrial Average declined 1.7% to end at 11707, the S&P shed 2% to 1229, while the Nasdaq dropped 2.3% to 2638. Disappointing earnings reports from Netflix, MF Global and 3M Co saw these stocks lead the falls. United Parcel Service Inc slipped as international shipping growth began to cool.
Asia & Australia
Across Asia, regional markets had a tough start after picking up negative leads from the US and Europe. Some of the markets in the region have since turned around, particularly in Australia.
Japan is underperforming, hurt by the USD/JPY which printed a new post-WWII low overnight. Japanese auto makers and marine shippers are likely to be hurt the most from the buoyant yen, which continues to hurt domestic industry. Exporting shares like Sharp, Honda, Bridgestone and Panasonic have all been hit hart today.
The Nikkei is the worst performer in the region - down 0.6% - and the Hang Seng is 0.5% weaker. The Shanghai is 0.8% higher, outperforming the rest of the region.
Australia's S&P/ASX 200 index is now above water as benign CPI data fuels hopes of an interest rate cut by the Reserve Bank of Australia next week. Headline CPI met expectations at 0.6% for the quarter and 3.5% for the year, while the more important core CPI rose 0.3%, which was half of the 0.6% rise anticipated.
On the charts, a close above uptrend line support at 4200 would be bullish, according to Dow Jones Newswires’ technical analysis. However, the downtrend line from the April peak (now at 4245) might cap the market before the EU leaders’ summit later amid concerns that the timetable for an agreement on a debt crisis plan appears to be slipping.
The index is up 0.3% at 4240, well off its intraday low of 4173.5 and 4197 before the CPI data.
Wall Street
Wall Street tumbled into the close last night as anxiety started to build amongst traders ahead of today's critical European summit, although this reaction is already looking to be a little overdone even if spread betting markets are looking a bit toppy right now.
With such an apparent theme of optimism in play, it's perhaps little surprise that Asian markets are now marching higher and, indeed, Wall Street futures are turning bullish once again too.
In light of this, whilst the major European markets may be left nursing modest losses at the open off the back of the US lead, downside is set to be limited. The theme of sitting on the sidelines will doubtless prevail until we start to get some word out of the various events in Brussels and Berlin that are due in the coming hours.
US durable goods orders stand to dominate on the economic calendar today, whilst there's another swathe of earnings set for release.
In London look for BATS, International Power and GSK, whilst Germany's SAP plus both Air Liquide and Peugeot are among those releasing Q3s in France. Wall Street remains awash with its own Q3 numbers with Ford, Boeing and Lockheed Martin just a few of the higher profile names due to report.
Ahead of the open we're calling the FTSE down 11 at 5515, the DAX down 18 at 6029 and the CAC down 10 at 3164.
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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"Gold Spread Betting Market Rises as Economic Concerns Spur Risk Aversion" last update by AG, 26-Oct-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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