Kazakhmys Spreads Lifted by Better Than Expected Australian Growth
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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 December 2011: 11.00am Update
Hopes of some new fancy financial footwork in the Eurozone, combined with better-than-forecast Australian economic data, meant that the FTSE 100 was able to extend its rally.
In smaller-cap stocks, Blacks Leisure became the latest retailer to endure a heavy fall in its share price.
By 10.30am (London time), the FTSE 100 was up 0.59% at 5601.61, while the FTSE 250 had risen 0.42% to 10,355.53. The leading index is now up just over 9% from its recent low of around 5080 as Eurozone optimism encourages spread betting investors back into equities.
Rumours of new funding structures for Europe extend gains for shares
And so the rally continues. The FTSE 100 kept pushing higher this morning, boosted by reports of more financial magic in the Eurozone.
A report in the Financial Times suggested that the Eurozone was planning to run its two rescue funds simultaneously, while also gaining more support from the International Monetary Fund. As part of the plan, payments into the new European Stability Mechanism will be speeded up, while the EFSF will continue to exist alongside the ESM, instead of being wound down.
In theory, the proposal has merit, since it enlarges the financial firepower of authorities in the Eurozone, although the existence of the proposal is a tacit admission that the EFSF has not been increased to the size deemed necessary.
Some are also arguing that the ESM will be able to access ECB funding, since it will be a treaty-based organisation similar to the IMF. However, it is still likely that both Germany and the ECB itself will object to this.
Ultimately, all this remains speculation. The crunch moment comes on Friday – if politicians signal that they are ready and willing to make sacrifices and concessions in order to reach a solution, then commodities spread betting markets may well continue this rally.
However, signs of discord or failure to achieve significant progress could cause the current run of risk appetite to evaporate quickly. We remain at the mercy of politicians.
Aussie data lifts mining shares
Mining stocks were enjoying a good morning, following better-than-expected growth data from Australia. The Commonwealth’s economy grew by 1% in the third quarter, ahead of the forecast 0.8% growth, while the second quarter’s expansion was revised up from 1.2% to 1.4%.
Still, the Reserve Bank of Australia has been warning recently of difficult times ahead, as China continues to slow and the Eurozone debt crisis exerts its malign influence.
Nevertheless, bulls are glad of any news at present, and many of the sector’s biggest names posted decent gains. Kazakhmys, Lonmin and Vedanta rose by more than 2.5%, while Rio Tinto was 2.2% higher at 3427p.
Blacks goes on the auction block
Blacks Leisure dived 43% to 2.13p after the company announced that it had put itself up for sale as a result of the failure of talks with shareholders.
The company had hoped to raise new funds from existing investors, but it has now invited further offers that will likely involve the sale of the business or some of its brands. This is not the first time that Blacks has come close to oblivion; the company was rescued from administration in 2009, with a deal that resulted in the closure of more than 100 stores.
Blacks Leisure shares kicked off 2011 at around 42p, and thus have lost 95% of their value during the year.
US pre-market
Wall Street looks set to resume its gains this afternoon, with Dow futures up 71 points and S&P 500 contracts 0.73% higher. It’s a quiet day for economic data from the US, with only the weekly mortgage application figures out at 12pm (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 7 December 2011: 5.00am Update
US markets bounced overnight on reports that European leaders are looking to significantly increase the size of the bailout fund.
The latest plan will be presented at this week’s EU summit and could include running two separate rescue funds and gaining increased support from the IMF. This would effectively double the size of the bailout fund.
Among the major averages, the Dow Jones Industrial Average climbed 0.4% to 12,150. The S&P added 0.1% to 1258, while the NASDAQ lost 0.2% to close at 2650. However, European markets were mostly weaker on the back of S&P’s ratings warning.
Asia
Across Asia, regional markets are stronger on growing optimism around the latest attempt by leaders to solve the European debt crisis. European leaders are now reportedly working on a plan that could double the size of the bailout fund. This latest development has superseded S&P’s move to put 15 Eurozone nations on ratings watch.
The plan involves allowing the Eurozone’s existing €440 billion bail-out fund to continue running when a new €500 billion facility comes into force in mid-2012, almost doubling the rescue system’s firepower.
The ASX 200 is outperforming the region with a 1% rise, while the Nikkei and Hang Seng are not far behind with gains of around 0.9% each. The Shanghai Composite is lagging the region with a 0.2% increase. In light of the strength we are seeing in the Asian region, both US and European spread betting markets are pointing towards gains at the open.
Australia
Australia's S&P/ASX 200 is up 1% at 4303, fading after an early rise to 4316.3 in response to Wall Street's resilience to S&P's warning on Eurozone sovereign credit ratings, and the credit risks to the EFSF.
Materials names are leading broad-based gains on light volume, with BHP Billiton up 1.3%, although Newcrest Mining is lower 1.3% after Deutsche Bank downgraded it on Tuesday. Australia's economy grew solidly in Q3 with GDP expanding 1.0% from Q2, beating expected growth of 0.8%.
Strong business investment and company profits fuelled the growth, while an inventory rundown, weaker government spending and substantial net exports detraction held back activity.
Europe
Friday’s EU summit has captured the attention of financial spread betting investors across all asset markets. With so much riding on the summit, we are likely to start seeing some cautious trading after the recent gains we have experienced. When expectations are so high, there is bound to be some disappointment.
The proposed changes to the EU treaty are likely to face challenges from the weaker nations with some leaders opposing the changes. British PM David Cameron has reportedly threatened to block EU treaty changes if London’s demands are not met.
Implementing any treaty changes might also turn out to be more complicated than it seems. With all the upcoming meetings, particularly on the European front, the headline risk has never been greater. On the economic front, today brings UK manufacturing and industrial production numbers.
Ahead of the European open we're calling the FTSE up 21 at 5590, the DAX up 43 at 6072 and the CAC up 17 at 3197.
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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"Kazakhmys Spreads Lifted by Better Than Expected Australian Growth" last update by AG, 07-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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