Randgold Resources Spreads Drop on Production Concerns
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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 November 2011: 11.00am Update
We've been here several times before, but markets have rallied strongly this morning on hopes of direct action on the Eurozone debt crisis. Reports of IMF help for Italy meant that the FTSE 100 continued the remarkable recovery that it started on Friday.
By 10.40am (London time), the FTSE 100 was up 2.1% at 5272.97, while the FTSE 250 had risen 2% to 9837.72. France, Spain, Germany and Italy all saw gains in excess of 3%.
Eurozone rumours sent markets higher
We had seen on Friday how desperate financial spread betting markets have been for a rally, and today's rumour du jour provided the perfect excuse for a massive surge.
Over the weekend, press reports suggested that Italy was about to receive a substantial slice of aid from the International Monetary Fund, with an Italian newspaper suggesting the tranche could be as big as €600 billion. A rescue on this scale would have done much to ease funding concerns in the Eurozone, but the IMF moved swiftly to deny the story.
Less excitable voices were also heard to wearily point out that the IMF only has around €285 billion in emergency funds, meaning that IMF members would have to stump up lots more cash. However, the voices of sanity have been ignored this morning, as the FTSE 100 looks to continue the remarkable turnaround that it started on Friday.
Also being used as a reason for today's rally is talk of budget discussions between the two big beats of the Eurozone, Germany and France. Paris and Berlin look keen to accelerate the implementation of tighter governance rules for the members of the single currency.
France will hope (probably in vain) that these measures will allow the ECB to intervene aggressively in the sovereign bonds of affected countries. There is some logic to this position; the ECB warned Rome in September that it would cease bond purchases of Italian government debt if austerity measures were not implemented.
However, an open programme of bond purchases would violate both the ECB's charter and the Maastricht Treaty, as well as incurring the wrath of Germany.
Everyone rallies…
Nonetheless, practically everything is rallying this morning, as investors scurry back to equities in the hope of Eurozone action. I've written that sentence so often now that it's beginning to lose its meaning - nothing has changed from last week, but the long losing streak that we saw in the last few days could not continue indefinitely.
Substantially more good news is required if this rally is to continue for more than a day or two. For now however, the bulls are in the ascendant. RBS and Barclays surged more than 6%, with Lloyds following on with a 5.7% gain, while the mining sector saw increases of between 2% and 5%.
…except Randgold Resources
However, there was one standout loser this morning. Gold miner Randgold Resources slumped 5.5% to 6400p after the company said that production in the fourth quarter would be adversely affected.
Wet weather, work stoppages and other problems will mean that production for the full year will now be in the region of 690,000 to 700,000 ounces, rather than the previous forecast of 740,000 to 760,000 ounces.
US pre-market
US markets are set to reproduce the impressive bounce seen in Europe this morning, with Dow futures up 258 points, with the S&P 500 seen opening around 33 points higher.
US new home sales data for October will be released at 3pm (London time), with the Dallas Fed manufacturing index for November out at 3.30pm (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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"Randgold Resources Spreads Drop on Production Concerns" last update by AG, 28-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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