Indices Spread Betting Markets Swing on Eurozone Crisis Fears
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 28 September 2011: 11.00am Update
The FTSE 100 stumbled this morning, as the surge in risky assets that saw such strong moves at the beginning of the week came to a halt.
Eurozone worries are behind the change in mood, as newspaper reports lay bare the extent of the divisions among European policymakers.
By 10.30am (London time), the FTSE 100 and 250 were both down 0.16%, at 5285.58 and 10,110.95 respectively. Both indices staged a small recovery during the morning, but failed to move into positive territory.
The wild swings that we have seen are a reflection of the real drivers of indices spread betting markets; hope and fear. Both are currently to be found in large quantities, but the evidence for either salvation or apocalypse is finely balanced.
Greek worries torpedo rally
The week's rally has been rudely interrupted this morning, as divisions in the Eurozone finally become apparent to markets that had spent the past two days merrily surging in apparent ignorance of the problems still besetting the single European currency.
The Financial Times reported that seven of 17 Eurozone states were demanding that private creditors suffer bigger write-downs on their holdings of Greek bonds, a move that threatens to derail the second bailout agreement crafted in July. This as well as German intransigence risks delaying the next tranche of aid money that Greece needed to keep going.
It is hard not to feel sorry for the Germans; at every turn, they have been labelled as the ones that are risking further crisis, as a result of their demands for more austerity.
But it is their money that will ultimately be used to prop up Greece and other indebted nations, and this has generated an understandable amount of resentment in Germany.
Whether Chancellor Merkel can keep public opinion on side in her efforts to hold the Eurozone together is an important question, but at present ordinary Germans appear to be becoming more discontented with the euro. Ultimately, popular opinion may trump the desire of politicians to hold the Eurozone together.
Renewed Greek worries have hurt banks this morning, while a stronger US dollar is adversely affecting mining shares. Some sort of fall was almost inevitable for the FTSE 100 after such a strong run, as traders choose to bank some gains in the prevailing environment of uncertainty.
The tussle between bulls and bears continues in much the same way as it has been for weeks now, as investors struggle to make sense of the mixed headlines and data that continue to emerge from Europe and the US.
Among the banks, Barclays and Lloyds were down 2.8% and 2.6% respectively, while Antofagasta and Xstrata led the mining sector down with falls of 2%.
Man overboard
Today's biggest faller on the FTSE 100 was hedge fund manager Man, whose share price dived 20% to 192.4p, as the firm's 'long-only' portfolios suffered heavily in the current market turmoil.
Assets under management fell, as investors withdrew funds to preserve cash, while a comment to the effect that investor sentiment would remain negative for the rest of the year gave the statement an added dose of gloom.
Today's fall wipes out most the gain in the share price seen since early August (when the shares dropped to a low of 178p), with Man down 36% for the year so far.
US pre-market
US markets pared much of their earlier gains last night following the FT's report on Eurozone divisions. At the moment, Dow futures are up 0.42%, while those for the S&P 500 are 0.25% higher.
US durable goods orders for August are published at 1.30pm (London time), and are forecast to show a drop of 0.2% from a 4% rise a month earlier.
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 28 September 2011: 6.00am Update
On Wall Street overnight, stocks posted their third straight session of gains on improving global sentiment.
That said, they did manage to finish off their highs amid reports of division in the Eurozone over the terms for the second Greek bailout. In Greece, the government approved an unpopular property tax which is crucial to its austerity plans.
The Dow Jones Industrial Average was the top performer - rising 1.3% - while the broad-based S&P 500 and NASDAQ rose 1.2% and 1.1% respectively.
Asia & Australia
Across Asia, regional markets are mixed as caution returns following the late session sell off on Wall Street, amidst FT reports suggesting that the Eurozone remains deeply divided over the second bailout package currently being discussed for Greece.
The Hang Seng is the biggest loser - down 1.1% - while both the Shanghai Composite and Nikkei 225 are 0.1% softer. The Kospi is 0.1% firmer.
In Australia, the spread betting market is managing to hold on to earlier gains despite widespread caution across the region. The ASX 200 is 0.7% firmer at 4034, off earlier highs of 4053. Once again, it’s the cyclical ‘risk’ sectors adding the bulk of the points with the energy, consumer discretionary, materials and industrial sectors all outperforming.
Europe
Looking ahead, European equities may have enjoyed something of a bumper session on Tuesday but once again it's looking like this will be little more than a dead cat bounce.
Sentiment turned just ahead of Wall Street's close last night, with reports that as many as seven Eurozone members want private bondholders to take a bigger hit on their Greek debt. The lack of consensus is clearly the most disruptive issue here.
Put simply, the market is no fan of uncertainty, so the absence of a united front will do nothing to calm volatility. There's not too much in the way of economic news due in the coming hours, though US durable goods orders do carry some weight and with contraction expected there's scope here for a surprise on the upside.
Earnings news is looking a little busier, however, with Man Group, Misys and Dominos (UK) reporting in London, whilst both Family Dollar and McCormick report ahead of the US markets opening.
Sentiment remains very much in the driving seat, but with so many opinions out there and consensus remaining some way off, it seems fair to say that the volatility isn't going anywhere fast.
Ahead of the open we're calling the FTSE down 72 at 5222, the DAX down 48 at 5580 and the CAC down 38 at 2985.
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 Swing on Eurozone Crisis Fears" last update by AG, 28-Sep-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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