Home Retail Share Price Spreads Plunge on Weak Sales Data
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 19 October 2011: 11.00am Update
Eurozone hopes sprang eternal this morning, as the FTSE 100 took its lead from last night’s strong rally on Wall Street to recover yesterday’s losses. A remarkably dovish set of Bank of England minutes also helped reassure traders.
By 10.55am (London time), the FTSE 100 was up 1.08% at 5468.67, while the FTSE 250 had risen 0.98% to 10,278.23.
Eurozone rumours keep traders happy
Last night’s rumour-inspired rally has managed to hold its ground this morning, as risky assets gained following a story in the Guardian that declared France and Germany had reached a deal on expanding the Eurozone bailout fund to €2 trillion.
Financial spread betting investors seem to be keen on the idea, despite all the problems with it. More sober heads have pointed out that the actual amount of funds available would be lower than this, at around €1 trillion, given the existing pre-commitments of the fund.
In addition, a purchaser of last resort, such as the ECB, would be needed as a backstop. This would provide to be a major hurdle, since the ECB has shown a distinct reluctance to act as a permanent defence line – the bank is happy to buy bonds for a short period, but only until Eurozone governments get their act together.
Still, the news has been sufficient to keep the rally going, with banking stocks leading the way. RBS led the way with a gain of 4% to 24.7p, while Lloyds rose 3.5% to 33.2p and Barclays gained 3% to 180.4p.
Gains in the mining sector were more muted, but still fairly substantial, with 1% rises fairly common, and ENRC adding 2.3%, reaching 655.5p.
BoE minutes reveal shift in thinking
In part, the gains have been aided by this morning’s Bank of England minutes, which struck a rather dovish tone.
All nine of Mervyn King’s merry band of policymakers voted to keep rates unchanged at 0.5%, but all of them also voted to increase the size of the asset purchase scheme by £75 billion.
This is slightly surprising, given how strong the hawkish lobby seemed earlier in the year, and is a reflection of how seriously the Monetary Policy Committee (MPC) views the Eurozone crisis.
The MPC stuck doggedly to its view that inflation would slow sharply during 2012, continuing to stress the threat of deflation (which must ring rather hollow to all those consumers out there who are enduring heavy rises in prices).
Shoppers desert Argos
Shares in Home Retail slumped 13% to 104.2p after pre-tax profit dived by 70% to £28 million and sales dropped by 6% to £2.57 billion. The fall was heaviest at Argos, which saw sales decline 7.5% during the year, as the impact of reduced consumer spending and competition from the internet hurt sales.
Crucially, Home Retail also cautioned about the outlook for the upcoming period, saying that conditions were both ‘weak and volatile’, and that the anticipated improvement in sales had not materialised.
US pre-market
Futures for the Dow and S&P 500 have managed to claw their way during the morning, and are now up 0.05% and 0.1% respectively.
Yesterday’s producer price data is followed by the September CPI (at 1.30pm London time), with prices expected to increase by 3.8%, and core prices (excluding food and energy) up 2.1%.
At the same time, September housing starts and building permits are published. Later this evening, at 7pm (London time), the Fed’s Beige Book survey of the US economy is published.
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 19 October 2011: 6.00am Update
US markets rallied overnight, in sharp contrast to the losses logged across Asia and some European markets.
The rally was led by reports that Germany and France will boost the size of the European rescue fund and some strong earnings reports in the US. The financial spread betting market also managed to shrug off a warning from Moody’s that it may slap a negative outlook on France’s AAA rating in the next three months.
Among the major averages, the Dow Jones Industrial Average climbed 1.6% to end at 11577, the S&P jumped 2% to 1225, while the NASDAQ surged 1.6% to 2657. Despite the positive close, futures markets have ticked lower after hours, as Apple’s highly anticipated earnings missed estimates. This has somewhat dampened spirits in after-market trading.
Asia & Australia
Across Asia, regional markets are all higher, tracking a late session rally in US markets. The Hang Seng is leading the region with a 1.6% gain. Elsewhere in the region, the Nikkei is up 0.7%, led by the financials, and the Shanghai is 0.3% higher.
In Australia, the ASX 200 got off to a solid start but has since retreated from its highs and is currently up 0.7%. It has been a much needed turnaround considering the huge losses logged across Asia yesterday.
We have also benefited from some positive reports from certain heavyweights. The financial sector is leading the gains after its US peers logged strong gains overnight following some solid earnings reports, particularly from Bank of America. The materials sector is lagging other sectors despite a fairly solid production report from BHP.
Europe
Turning to the European session, European markets are showing a uniformly upbeat start to the session.
Next up on the economic calendar we have the BoE's MPC meeting minutes plus US inflation data, with both of these having the potential to offer some wider direction, whilst the earnings agenda is looking somewhat busy too.
American Express and Morgan Stanley keep the financials in focus on Wall Street, whilst in the UK highlights include BSkyB, Home Retail and Diageo.
It's worth bearing in mind, however, that the expansion of the EFSF is only part of the problem facing both Europe and the wider global economy.
With protests in Greece over planned austerity measures intensifying, this ongoing failure to win over the population means the future of its membership in the Euro-club must still have a significant question mark hanging over it.
Ahead of the open we're calling the FTSE up 50 at 5460, the DAX up 73 at 5950 and the CAC up 34 at 3175.
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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"Home Retail Share Price Spreads Plunge on Weak Sales Data" last update by AG, 19-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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