Optimism in US Economy Boosts Commodity Spread Betting Markets
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 11 January 2011: 11.00am Update
Markets paused for breath this morning, as positive news from earlier in the week was offset by a warning from Microsoft and unease about an upcoming slew of Eurozone bond auctions.
By 10.30am (London time), the FTSE 100 was down 5 points at 5691.66, while the FTSE 250 had risen 0.66% to 10,416.25.
Cautious mood descends
Action on the indices spread betting markets this morning has been distinctly uneventful, as the positive and negative factors cancel each other out.
The upward trend of markets so far in 2012 appears to be running out of steam, as unease about the US earnings season and upcoming bond auctions in Europe dampens sentiment.
Generally, markets had been rolling along quite contentedly for the year to date, boosted by hopes of Chinese monetary easing and a positive outlook from Alcoa, which has set off the quarterly update period in the US in upbeat fashion.
The S&P 500 hit a five-month high yesterday, up for five out of six trading days so far. In addition, the Eurozone crisis has been remarkably quiet, with politicians avoiding any apocalyptic pronouncements and bond traders seemingly laid-back for now about worsening budget deficits in Spain and Greece.
However, the picture appears to be somewhat bleaker now, as corporate giant Microsoft warns about PC sales for the final quarter of 2011. This dims the hope that tech stocks will be at the forefront of any rally in 2012, and dispels some of the generally positive mood created by Alcoa on Monday evening.
Adding to this, Germany, Spain and Italy will be auctioning debt this week, on Wednesday, Thursday and Friday respectively. This provides some opportunity to gauge market sentiment about Eurozone bond purchases, but bulls will be hoping the ECB will be active to fill any gap left by bond funds.
Sainsbury's & Greggs toast Christmas sales
Sainsbury's became the latest supermarket to update investors with its performance over Christmas, reporting that sales were up 2.1% for the 14 weeks to 8 January and online sales up 20%.
Chief Executive Justin King said that the Christmas period had been the best ever, although he declined to say whether this was in real, i.e. adjusted for inflation, terms or simply a flat comparison. The shares edged back 0.4% to 304.76p.
Baker Greggs was 0.4% higher at 520.4p, after saying that sales for December were up 5%, while margins had been assisted by a drop in the cost of ingredients.
Greggs still expects the economy to be weak throughout 2012, with consumers continuing to be squeezed by rising costs and flat wages.
Looking ahead
More Fed members will be making various Delphic utterances about the US economy today, as a prelude to the latest Beige Book publication at 7pm (London time), the Fed's informal survey of the US economy.
Dow futures are 16 points higher, while those for the S&P 500 are up only 0.8 points.
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 11 January 2012: 6.00am Update
Overnight, US markets continued to push higher on a growing belief that the US economy was gaining some traction and was capable of moving beyond the European concerns which have plagued global markets over the last two years.
Among the major averages, the Dow Jones Industrial Average added 0.6% to close at 12,462, the S&P jumped 0.9% to 1292, while the NASDAQ was 1% higher, ending at 2676. Among the major S&P sectors, materials, industrial and financial names were the best performers.
Asia and Australia
Across Asia, regional markets are mixed despite the strong gains on Wall Street overnight. The Hang Seng is the region’s best performer, higher by 0.3%, while the Nikkei 225 is seeing a gain of 0.2%. Elsewhere, the Kospi and the Shanghai Composite are weaker by 0.3% and 0.2% respectively.
In Australia, the ASX 200 is currently 0.7% stronger at 4182, well off its earlier session high of 4202. Today’s market action has been buoyed by a growing belief in the health of the US economy and the surge in the commodities spread betting markets overnight, which gained amidst the optimism.
The strength today has been broad-based, with the heavyweight materials, energy and financial sectors the best performers. This is clearly a bullish sign indeed for the Australian market.
Asian markets, whilst generally in positive territory, seem to lack any real drive or conviction and you get the sense that traders are asking, where to now?
Europe
European markets look set to give up some of yesterday’s hard work and could see relatively directionless trade, at least until the US comes in.
The S&P 500’s break but subsequent failure to close above the October 27 high may indicate a lack of belief from the bulls. Until we see a close above 1292.66, shorts will be happy to sit tight.
Gains in Alcoa may have swung the odds in favour of a positive few weeks ahead on the S&P, but these are unusual times and it seems anyone’s guess as to the outcome of the Greek PSI, Private Sector Involvement.
On one hand it should be seen as risk positive that we may get an agreement very soon, but the fact Greece may give up the voluntary restructuring principle will no doubt make investors nervous.
Moves in Italian and Spanish yields will be closely watched tonight, but one gets the suspicion the Greeks are playing political hardball with creditors and trying desperately to get bondholders to accept a higher level.
EUR/USD traded in a tight range in Asia but did pull back to $1.2729.
Although there were no real firm catalysts, perhaps headlines that the Italian Social Democrat Party are calling for Italy to exit the euro was enough. Having said that, the lack of follow-through selling suggests no one really sees this as a real threat anytime soon.
Risk assets are at a key inflection point with the S&P 500 needing to make a new closing high, WTI and Brent crude oil testing resistance, whilst EUR/USD is stuck in no man’s land. Many investment banks are putting out recommendations to see a lower euro, whilst others want to see $1.2850 before putting on shorts.
Tonight Germany takes centre stage as they not only try and tap the market for €4 billion in five-year OBL’s, but also release 2011 GDP. The US Beige Book will be of interest ahead of the barrage of event-risk tomorrow night.
Given QE3 is seemingly back on traders’ radars after recent Fed chatter, one gets the feeling that any improvement around the 12 districts could see the USD bulls having the extra kicker of pricing out of asset purchase expectations.
Ahead of the open, though, we are calling the FTSE -16 at 5680, the DAX -28 at 6134 and the CAC -12 at 3198.
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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"Optimism in US Economy Boosts Commodity Spread Betting Markets" last update by AG, 11-Jan-2012
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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