Hang Seng Spreads Track American Markets Lower
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 4 October 2011: 11.00am Update
The FTSE 100 fell sharply this morning, hit by dual concerns over the instability of the eurozone after European finance ministers delayed their decision to release the next tranche of bailout funds to Greece, and the increasingly likelihood that Europe will fall back into recession.
By 10.30am (London time), the FTSE 100 had fallen 2.46% to 4951.85, although it had managed to recover from its 2011 low of 4934.64, whist the FTSE 250 was 2.45% lower at 9510.90.
The Greek debacle continues
Last night, Eurozone finance ministers announced they had reached a (relatively unattractive) deal to provide collateral to Finland in exchange for future aid to Greece. The collateral deal would include investments funded by Greek government bonds routed through Greek banks, but only released after 30 years.
The meeting predominately revolved around discussions on Greece and the possibility of leveraging the bloc's bailout fund to make it larger.
However, the most anticipated topic of approving the €8 billion tranche of emergency bailout funds to Greece was delayed. Jean-Claude Juncker, Eurogroup president, said a decision on whether to award another tranche of aid to the country would not take place until an audit report was received from international creditors.
Greece could now wait until mid-November until it receives the next instalment from its existing emergency aid programme, piling more pressure on Athens to tackle its debt problems.
Last month Athens announced the country could run out of money by mid-October, however Mr Juncker and other officials said they believe Greece has enough funds until mid-November, adding extra pressure on Greece to increase austerity.
Europe likely to fall back into recession
This morning, Goldman Sachs announced it had cut its forecast for global growth in 2012 and said it now expects the Eurozone to sink into a soft recession before the end of the year.
Goldman Sachs further announced that the Eurozone is likely to see a contraction of 0.1% from the fourth quarter of 2011 to the first quarter of 2012.The firm said its global growth forecast has been cut to 3.5% in 2012 from 4.2% and that Eurozone growth this year is now expected to be 0.1%, compared to its prior forecast of 1.2%.
Meanwhile, UK economic data released this morning showed that construction activity stagnated in September.
The construction PMI index fell sharply to 50.1 in September from 52.6 in August, its lowest reading since a contraction in December 2010.
A slow-moving housing market has dented the appetite for new residential construction, while government spending cuts have reduced the public funds available for civil engineering projects.
Today's weak construction figures contrast with yesterday's surprising growth from the manufacturing sector, and come at a time when the Bank of England mulls over whether to start a second round of quantitative easing.
Dexia tumbles
Franco-Belgian group Dexia saw its shares plunge for a second straight day today after it came under increasing shares spread betting market pressure over its exposure to Greece.
The troubled bank said in a statement after an emergency board meeting, that it's large portfolio of legacy assets is hampering it structurally. The emergency meeting came after ratings agency Moody's announced yesterday that it was reviewing the bank for a downgrade.
Belgian Finance Minister, Didier Reynders, added today that the French and Belgium governments may act to help the bank amid signs that it could be split up. Dexia saw its share price plunge over 25% to €0.83 this morning.
US pre-market open
US futures are weaker, pointing to further losses on Wall Street this afternoon. S&P 500 futures are down 0.03%, while the Dow is 0.27% lower.
US factory orders are out at 3pm (London time), the same time as we will hear US Federal Reserve chairman, Ben Bernanke, testify.
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 4 October 2011: 6.30am Update
Overnight, US stocks began the new quarter as they ended the previous one; getting hammered on concerns over Greece’s downward-spiralling budgetary position, and the prospects of a broadening global slowdown.
All three major indices closed at their lowest levels in more than a year and posted their worst start to October since 1998. The issues in Europe overshadowed some better-than-expected US economic data, which saw manufacturing expand at a slightly faster pace than expected in September, and an unexpected gain in construction spending.
Among the major averages, the Dow Jones Industrial Average fell 2.4% to end at 10655, the S&P shed 2.9% to 1099, while the NASDAQ slumped 3.3% to 2335. All S&P sectors were significantly lower, led by the financial and energy sectors.
Asia
Across Asia, regional markets are all lower on the back of another appalling session on Wall Street, which saw the major indices finish at their lowest levels in almost a year.
The Kospi, returning from a holiday yesterday, is the worst performer - down by 5.1% - while the Nikkei 225 and the Hang Seng are seeing losses of 0.9% and 1.6% respectively. The Shanghai Composite remains closed.
Unfortunately for spread betting investors, the start of a new quarter has not heralded a change in sentiment, with the market continuing to grapple with Greece’s debt predicament and concerns over a broadening global slowdown.
How many times can the market sell off on these themes? Are these concerns not already factored into equity prices? How much further will global markets fall before ’value‘ becomes too compelling to ignore?
Politics causing frustration
At the moment, there are such diverging views and opinions on all of these questions. The lack of any consensus, in our view, can be attributed to the amazingly frustrating inability of policymakers on both sides of the Atlantic to take any decisive action.
The Eurozone structure prevents any one nation working towards the best interests of the region as a whole when it might be to the detriment of its own constituents.
Over in the US however, the political process has ground to a drawn-out stalemate, as congressmen and senators govern for their own re-election prospects rather than for the good of the country. There’s certainly not much allegiance to good old Uncle Sam being shown by US politicians who have sworn to act in the best interests of the people they represent!
Europe
Turning to Europe, clearly the major macroeconomic stories will dominate once again, but there are a few peripheral events which may offer a degree of influence. UK construction PMI, Eurozone PPI and Federal Reserve Chairman Ben Bernanke's testimony to the Joint Economic Committee are all on the agenda.
Earnings news is relatively low key again, with UK listed Wolseley delivering full year results whilst Wall Street's Yum! Brands serves up its Q3 numbers.
All told, however, we may well have another scrappy day on the cards, so ahead of the open we're calling the FTSE down 85 at 4980, the DAX down 108 at 5268 and the CAC down 59 at 2868.
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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"Hang Seng Spreads Track American Markets Lower" last update by AG, 04-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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