Indices Spread Betting Markets Higher on Coordinated Central Bank Action
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 1 December 2011: 11.00am Update
Indices spread betting markets in London started the final month of the year cautiously higher after yesterday's coordinated action by major central banks raised hopes that the ECB may take more drastic action to help stem the Eurozone debt crisis.
By 10am (London time) the FTSE 100 was up 0.52% at 5534.28 while the broader FTSE 250 was flat at 10,315.15.
Chinese manufacturing activity contracts
China announced today that the world economy faces a worse situation than in 2008, and that stimulating growth is the top priority, after data from the world's second largest economy showed a slump in export demand had stalled manufacturing.
China's official PMI reading showed factory activity shrank in November for the first time in nearly three years, as demand weakens both at home and abroad.
The official PMI fell to 49 in November from 50.4 the previous month, while the HSBC China PMI reading dropped to a two-and-a-half year low of 47.7 in November from October's 51.
The November PMI final reading points to a sharp deterioration in business conditions across the Chinese manufacturing sector as China's top two export markets (Europe and the US) struggle to get a hold of their debt situation.
Eurozone and UK PMI also shrinks
The UK manufacturing sector shrank for a second successive month in November as output and orders fell from the US and Asia, showing a weakening in global demand.
The UK PMI reading fell to 47.6 in November, its lowest level since June 2009, from an upwardly revised 47.8 in October, raising the prospect that the UK economy could be heading for another recession.
Separately, the Eurozone’s manufacturing sector contracted at its fastest pace in two years as the region's 17-nation policymakers struggle to deal with a raging debt crisis. Eurozone PMI fell to 46.4 in November, its lowest level since July 2009, down from October's 47.1.
Earlier data from Germany showed its manufacturing sector also contracted at its fastest pace in over two years, to 47.9, while in neighbouring France the index sank to its lowest reading since June 2009, to 47.3. Italian factory activity contracted for the fourth consecutive month to 44 while Spain's shrank for a seventh month.
Eurozone crisis update
Though some might be fed up of reading about the Eurozone debt crisis, I doubt it will go away anytime soon. Yesterday European finance ministers wrapped up their two-day meeting, but failed to present any sustainable devices to solve the debt crisis.
However there was agreement on the increasing likelihood that the ECB will most likely be the indispensable saviour of the Eurozone. Despite that, the ECB continues to resist calls to ride to the rescue, arguing that cranking up its printing presses or buying bonds from distressed governments on a grand scale would violate its mission to ensure price stability.
Meanwhile, Spain and France will auction €8.25 billion of bonds today as European efforts to strengthen the region's firewalls against contagion failed to rein in surging borrowing costs.
The auctions will test investor confidence after the central banks, which include the ECB, got together in a coordinated effort yesterday and cut the cost of emergency dollar funding for European banks.
US pre-market
US futures were marginally weaker this morning with Dow Jones futures down by 0.17% and S&P 500 contracts 0.23% lower.
Looking ahead to US releases this afternoon, at 1.30pm we will see weekly jobless data, followed by ISM manufacturing and prices paid 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 1 December 2011: 5.00am Update
Global markets rallied overnight after six central banks led by the Federal Reserve moved to ease the flow of funds to financial institutions, and China cut the amount of cash that its banks must set aside as reserves.
The Fed coordinated the move with the European Central Bank plus the central banks of Canada, Switzerland, Japan and the UK. The moves were cheered by spread betting markets, as it shows central banks are willing to work together to ease Europe’s sovereign debt crisis. China decided to cut the Required Reserve Ratios of banks by 50 basis points.
Among the major averages, the Dow Jones surged 4.24% to end at 12,046. This was the Dow’s biggest gain since 23 May 2009. The S&P soared 4.3% to 1247, while the NASDAQ charged 4.2% higher to close at 2620.
There was also some impressive data out of the US, with ADP non-farm employment change and pending home sales coming in way ahead of expectations.
Asia & Australia
Across Asia, regional markets are all strongly positive after the coordinated central bank liquidity support lines announced overnight. The Hang Seng is the region’s best performer, higher by 5.7%, while the Kospi is up 3.7%. Elsewhere, the Shanghai Composite and the Nikkei 225 are firmer by 3.5% and 2.1% respectively.
In Australia, the ASX 200 is currently 2.7% firmer at 4233. As expected with such strong offshore leads, gains for the day are broad-based and are being led by the materials sector which is benefiting from a huge jump in overnight commodity prices. The heavyweight financial and energy sectors are also higher by between 2.5% and 2.8%.
Coordinated central bank action
The overnight price action across global equity markets was confirmation that financial markets love nothing more than coordinated central bank action.
With the US Fed, the ECB and the central banks of England, Japan, Canada and Switzerland all agreeing to work together to provide liquidity support lines to make it easier for European financial institutions to access cheaper sources of funding, the markets seemed to take heart in the ‘all hands on deck’ approach.
So far the sole European involvement in solving the current crisis has proved ineffectual, so last night’s coordinated response was a welcome result. In light of the strength we are seeing in the region, we are calling European markets significantly higher at the open.
Today brings UK manufacturing PMI data and the BoE’s financial stability report.
Ahead of the European open we're calling the FTSE up 19 at 5524, the Dax up 35 at 6124 and the CAC up 15 at 3170.
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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"Indices Spread Betting Markets Higher on Coordinated Central Bank Action" last update by AG, 01-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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