Rumours of M&A Activity Lifts Financial 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 23 August 2011: 11.00am Update
European equities continued yesterday's rally, helped by miners rising on the back of stronger metal prices following China's factory data and better-than-expected European PMI data.
The FTSE 100 rose 1.4% to 5164.38 by 10.15am (London time) while the broader FTSE 250 reached a morning high of 10,034.63.
Miners boost UK equities
Rumours of M&A activity helped to lift financial spread betting investor sentiment this morning.
ARM Holdings was among the top blue-chip risers, jumping 5.2% as traders revived talks about the chip designer's appeal as a bid target. Charter International jumped 10.6% to 688p after the Daily Telegraph newspaper announced an unidentified rival had made a £1.5 billion takeover proposal for the industrial tools maker.
The Daily Telegraph said the offer was priced between 870p and 900p per share and speculated that it could have been from Lincoln Electric. Melrose, another company which has already made a bid for Charter International, offered 840p per share.
Better-than-expected earnings reports also helped to boost miners this morning. Chilean miner Antofagasta was up 3.4% after reporting a 54% rise in first-half earnings to 696.2 million, in line with analysts' forecasts.
Other miners trading significantly higher this morning were Xstrata, whose shares jumped 3.3% to 694.8p; Glencore, which rose 3.1% to 366p and BHP Billiton, 2.7% higher at 1931p.
Chinese HSBC PMI data
China's factory sector is showing signs of a slight slowdown for a second consecutive month as fragile overseas demand weakens new orders, as seen in HSBC's PMI index today. The reading is preliminary, with a final reading to be published on 1 September.
The manufacturing PMI was slighter higher in August at 49.8, compared to July's final reading of 49.3. Stock markets rallied on hopes for Chinese growth, as there had been some market speculation that the reading could be considerably weaker.
However, as the indicator continues to show some contraction, gold reached another fresh high at $1917.9 per ounce, as underlying market nerves remain over the US and European economies possibly entering a double-dip recession. The report though remains consistent with overall growth of about 8-9%.
Preliminary European data
Data released from Europe today revealed that European services growth held steady in August, albeit coming in at its slowest pace in almost two years. The PMI composite index remained at 51.1, the lowest since September 2009. Nevertheless this came in better-than-expected as economists had forecast a drop.
Manufacturing PMI contracted less-than-expected at 49.7 compared to a forecast of 49.5, while the services PMI grew at 51.5, compared to a 50.9 forecast.
German PMI data also released this morning confirmed that the Eurozone's largest economy is losing momentum as the sovereign debt crisis persists. German manufacturing PMI remained at 52.0 in August and services PMI showed a lower-than-expected reading at 50.4. Data from the ZEW survey also revealed that the economic sentiment for Germany in August fell to a weaker than forecast -37.6.
US pre-market open
US futures were higher this morning suggesting that US stocks will continue to extend their gains this afternoon when the markets open.
S&P 500 futures were 1.6% higher at 1140.90 and Dow Jones futures were up by 1.1% to 10,854.65 by 10.15am (London time). This afternoon the US will release home sales data and the Richmond Fed manufacturing index at 3pm (London time).
However, most likely dominating market sentiment over for the next few days will be Friday's press conference at the Jackson Hole symposium by US Federal Reserve chairman, Ben Bernanke.
Investors expect him to clarify the Fed’s conditional hold on rates until mid-2013, and will pay close attention to any possible announcement of new stimulus measures.
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 23 August 2011: 6.00am Update
In the US overnight, it was a very quiet session characterised by low conviction trading as well as low volumes, as traders continued to grapple with the macro issues facing financial markets.
After being significantly higher early on, markets didn’t have the strength to hold on to gains, eventually finishing with very modest gains.
The Dow Jones Industrial Average was the best performer - rising 0.3% - while the Nasdaq could only manage a gain of 0.2%. The broad-based S&P 500 rose 0.3 of a point to finish the session unchanged.
Asia & Australia
Across Asia, regional markets are all cautiously higher despite the flat lead from Wall Street overnight. Investors seemed to be buoyed by signs of relative improvement in the Chinese economy after the Chinese Flash PMI came in at 49.8, which is still down but ahead of last month’s reading of 49.3.
The Kospi is the standout performer - up 3.3% - while elsewhere the Hang Seng, Nikkei 225 and Shanghai Composite are all up between 0.5% and 0.6%.
In Australia, the ASX 200 is currently 1.5% firmer at 4144, just off its earlier highs of 4156. Once again the market is proving a conundrum for investors, shrugging off flat leads to be convincingly higher.
Yesterday we saw similarly sized gains disappear in afternoon trade with the market finishing firmly in the red. Will the same theme play out again today?
That’s what shares spread betting investors are asking, which signals a lack of trust in equities at present. For the moment at least, the market’s gains are broad-based, with the energy, materials, financial and industrial sectors all up by between 1.3% and 3.1%.
The US & Europe
Gains on Wall Street by last night's close may have been less than stellar, but some meaningful support has been forthcoming across Asian markets after HSBC's Chinese PMI reading surged.
Suggestions like this reinforce the prospect of global economic growth, which stands to provide the upside right now. Equally, they stand to help extend the relief rally that got underway in London yesterday.
That said, there's also the fact that much of the gains being seen here seem to be coming off the expectation that the Fed will serve up further stimulus measures, possibly as soon as the end of this week. Clearly with this being priced in, failure to deliver here will see traders heading for the exits once again.
At a more granular level, we've got Eurozone PMI data, the German ZEW survey, US new home sales and the Richmond Fed's manufacturing index all to come in the hours ahead.
Assuming we have no surprises here, again these readings could help sustain momentum. Earnings news is also looking a little more upbeat with John Wood Group, Persimmon, SEGRO, G4S and Cairn Energy amongst some of the higher profile reports in London, whilst HJ Heinz leads US companies.
Ahead of the open we're calling the FTSE up 40 at 5135, the DAX up 21 at 5495 and the CAC up 17 at 3068.
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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"Rumours of M&A Activity Lifts Financial Spread Betting Markets" last update by AG, 23-Aug-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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