Share Spreads: Fresnillo Falls on Lower Production Output
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 12 October 2011: 11.00am Update
Markets took the Slovakian rejection of the Eurozone rescue fund in their stride this morning, continuing to rise despite this and a fairly poor earnings release from Alcoa. For now, the optimists are back in charge.
By 10.50am (London time), the FTSE 100 was up 0.56% at 5425.76, while the FTSE 250 had raced ahead 0.96% to 10,252.51.
Slovakia takes a stand
Slovakia has warmed the hearts of Eurosceptics across the continent with its rejection of the EFSF rescue fund. As expected, the government was unable to muster the needed majority, since opposition parties voted against the measure in order to force an election.
However, in true EU style, Slovakia will vote again in order to get the 'right result'; and this time round the measure will pass, finalising the round of votes that had to be completed in each Eurozone country before the expansion of the fund could go ahead.
Financial spread betting markets were broadly unmoved by the news, with stability aided by the knowledge that the Slovaks would vote again, and that, if necessary, the rest of the Eurozone could make up Slovakia's contribution if the country exempted itself from the fund (Slovakia making up a mere 0.8% of Eurozone GDP).
Burberry sales growth slows
Clothing retailer Burberry saw sales growth slow during the second quarter, hurt mainly by a slowdown in the wholesale division. Growth in the April to June quarter was 26%, compared to 34% in the first three months of the year.
Crucially, Burberry failed to address how it had been affected by a slowdown in China, one of the fast-growing firm's key markets. The company also did not mention how margins had been affected in the latest quarter. However, the continued growth in sales cheered investors overall, with the shares up 2.5% at 1296p.
Fresnillo reduces output target
Mexican silver miner Fresnillo dropped 5.6% to 1604p after it cut its production target for 2011. The company has been on a safety drive to tighten up working conditions, following two fatalities at the eponymous mine, which has slowed production.
As a result, output for the third quarter was down 5.8%, while the full-year target has been reduced to 41 million ounces from an earlier estimate of 44 million ounces. Fresnillo expects the rate of production to improve during the fourth quarter.
Oil demand expected to slow
The International Energy Agency (IEA) has said that oil demand around the world will grow by less than forecast, as the global economy slows. The monthly report has taken 50,000 barrels a day off the expected level of consumption for 2011, while the 2012 figure was reduced by 210,000 barrels per day to 90.5 million.
Despite this, the IEA said that demand was still growing at a moderate rate. Crude oil spread betting prices rose 0.4% for both US and Brent crude, helped by a weaker dollar and also by the diplomatic row between the US and Iran, which has increased tensions in the Gulf region.
US pre-market
After a lacklustre finish for Wall Street yesterday, US futures are sharply higher, up 0.8% for both the Dow and S&P 500.
While weekly mortgage data is released at midday (London time), the key moment will come later when the latest set of Fed minutes are published, at 7pm (London time).
These minutes will reveal the discussions that took place in advance of the decision to implement 'Operation Twist'. The minutes may help investors to gauge the balance of opinion on the FOMC, and whether more QE is a likelihood if the economic situation continues to worsen.
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 12 October 2011: 6.00am Update
Overnight, US stocks ended mixed having traded in a tight range for most of the day after 3% plus gains yesterday.
Indices spread betting investors remained focused on developments out of Europe and eagerly awaited Alcoa’s Q3 earnings results, which were due out after the closing bell.
Among the major averages, the Dow Jones Industrial Average shed 0.2% to end at 11416, the S&P added 0.1% to 1195, while the NASDAQ jumped 0.6% to 2583. Among the major S&P sectors, technology, industrial and materials names edged higher.
As expected, the Slovakian government did not vote to strengthen the Eurozone’s EFSF rescue fund but a re-vote later this week is expected to be passed after further lobbying.
Outside of the Slovakian vote, the result of which was widely anticipated, it was a relatively benign session. Stocks traded in a tight range, really consolidating gains made in the previous session and over the course of the last week.
The fact that the market essentially paused and did not see any meaningful retrace was an important confidence booster, as it confirmed that there has been some conviction behind this recent rally and investors are anticipating it to continue.
After the bell, Alcoa’s results were a little disappointing with earnings missing expectations, while revenue topped forecasts.
The company delivered earnings of 15c per share, up from 9c a year earlier but short of the 22c that analysts were expecting. Revenues of US$6.42b were ahead of consensus estimates of US$6.22b.
The company cited falling prices and soft demand out of Europe as challenges over the quarter, but said that with the exception of Europe, it was seeing growth in all its end markets and was bullish on future Chinese demand.
Asia and Australia
Across Asia, regional markets are mostly lower after Wall Street paused for breath in overnight trade to register a mixed close.
The Nikkei 225 is the region’s worst performer, lower by 0.7%, while the Hang Seng and the Kospi are off by 0.3% and 0.1% respectively. The Shanghai Composite is bucking the trend to be higher by 1.6%.
In Australia, the ASX 200 is currently 0.5% weaker at 4205, but well off its earlier session lows of 4167. With US markets pausing to consolidate recent gains last night, the local market was always going to come under pressure today and that’s exactly what we have seen.
Cyclical sectors such as the materials, energy and industrials are all lower between 1% and 2% while the only gains are being witnessed in the defensively postured consumer staples and utilities sectors.
Europe
Turning to the European session, with the Troika having suggested that Greece will be awarded the next tranche of bailout funds anyway, perhaps a degree of consolidation isn't unsurprising with a lot of surplus cash still kicking around and the calendar year-end looming.
It does seem as if the buyers may simply be lingering on the sidelines, waiting to time their next foray into the market.
After yesterday's upbeat NIESR estimates for UK GDP, expect today's unemployment data from London to be under scrutiny, whilst Eurozone industrial production and US mortgage applications add to the economic agenda.
Earnings news also continues to flow with Pepsico releasing its Q3 numbers on Wall Street before the open and Burberry Group reporting in London too.
Ahead of the open we're calling the FTSE down 27 at 5369, the DAX down 33 at 5832 and the CAC down 14 at 3140.
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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"Share Spreads: Fresnillo Falls on Lower Production Output" last update by AG, 12-Oct-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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