Indices Spread Betting Markets Lower as Greek PM Resigns
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 7 November 2011: 11.00am Update
A change of government in Greece has done little to placate markets, as the focus of attention shifts westward in the Mediterranean, to Italy. Italian bond yields remain uncomfortably high, as Prime Minister Berlusconi struggles to remain in office.
By 10.45am (London time), the FTSE 100 was down 1.4% at 5449.53, while the FTSE 250 had fallen 1.34% to 10,248.61. European markets also saw heavy losses, with the notable exception of the Athens exchange, which was up 0.84%.
Mr Papandreou departs
After a weekend of tortuous negotiations, Greece now has a coalition government comprising the two main parties. This new administration will steer through the implementation of the latest €130 billion bailout plan, before holding elections early in 2012.
In the running to succeed the embattled Mr Papandreou are a former vice-president of the ECB and a former EU commissioner, both potential candidates because of their economic experience and relatively uncontroversial political backgrounds.
Greece's finance minister, Mr Venizelos, who had been considered a possible replacement for Mr Papandreou, is off to a Eurogroup meeting today, where finance ministers will discuss the Greek crisis. He will hope that the weekend's discussions will make his fellow finance ministers more amenable, now that Greece has seemingly resolved to press ahead with more austerity measures.
The Greek element of the crisis might (I stress, might) be receding into the background, but the growing governmental crisis in Italy threatens to create even greater headaches for beleaguered Eurozone bureaucrats.
Prime Minister Berlusconi clings on to power, but his coalition appears to be disintegrating, which imperils the latest round of austerity measures. The ECB has threatened to stop buying Italian government debt if these austerity efforts are abandoned, a move that could result in Italy being shut out of credit markets entirely.
Even ECB buying may not be sufficient, as yields on Italian ten-year government bonds creep ever higher.
This morning they touched 6.63%, uncomfortably close to the 7% level. It was at this point that Greece, Ireland and Portugal were forced to call for help, but, as we have said so often in the past, an Italian plea for aid would use up all the remaining funds in the EFSF rescue pot.
It is this worry that is driving the risk-off trade this morning, as indices spread betting markets across Europe shed ground. Bank stocks have been hit hard, with Lloyds down 4.3%, RBS off 3.2% and Barclays down 3%. Mining stocks are also doing their bit, with Kazakhmys, Rio Tinto and Vedanta all down more than 2.5%.
Weir sees business flow ebbing
The heaviest faller in the blue-chip index today is engineering group Weir, which has dropped by 7% to 1795p.
Although third-quarter revenue was reported to be growing more strongly than in the first half, and also on a like-for-like basis compared to 2010, the company said that overall market conditions remained challenging. Peel Hunt reiterated its 'hold' stance on the shares, with a 2100p target price.
Carphone Warehouse calls time on Best Buy
Carphone Warehouse has decided to throw in the towel on its Best Buy stores, closing all 11 sites with the loss of 1100 jobs. The company has suffered operating losses of £47 million for the half year to 30 September, as UK consumers hoard their cash in these difficult times and delay spending.
It is a far cry from the original plan of having 200 large stores across the UK, and employees at Dixons and Comet will be breathing a sigh of relief that at least one of their worries has disappeared. Carphone Warehouse shares rose 5.75p to 350.75p.
US pre-market
US futures are sharply lower, with the Dow down 115 points and the S&P futures off by 14.6 points. US economic data is notably absent today, with only September consumer credit due at 8pm (London time) today.
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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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"Indices Spread Betting Markets Lower as Greek PM Resigns" last update by AG, 07-Nov-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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