Shares Spread Betting: Greek Concerns Calmed by Outstanding Apple Performance
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 25 January 2012: 6.00am Update
In US trade, markets retreated after the Greece debt negotiations failed to yield a result. Greece moved closer to the possibility of a chaotic default, after Eurozone officials rejected a final offer from the country’s private bondholders.
However, we actually saw markets come off their lows, suggesting investors are now starting to pay less attention to the Greek situation. Reporting season in the US continues to yield some encouraging results in the face of tough economic conditions.
Among the major indices spread betting markets, the Dow Jones Industrial Average lost 0.3% to close at 12,675. The S&P shed a point to 1315, but the NASDAQ added 0.1% to close at 2787. A few key results were released after market close with Apple smashing expectations.
Asia
Unlike the past two sessions, today's Asian trade has been fairly eventful, with plenty of economic data to digest. Some of the markets in the region that had been closed for the Chinese New Year came back on line today, helping to shore up the region.
There were few developments on Greece following the conclusion of Monday’s monthly finance minister meeting, although the continued uncertainty is keeping investors cautious.
After a subdued night of trading on continuing worries over Europe, risk assets saw a strong recovery into the close of US trade. A monster result from Apple was one of the key catalysts in after-market hours trade. This helped markets in the region rally after the open.
Japan has drawn significant interest after trade data showed it posted its first annual deficit since 1980, largely as a result of last year’s tsunami and one-off factors. However, this had largely been flagged and the Nikkei has actually enjoyed a strong session led by the exporters.
A significantly weaker yen has given some much-needed relief to Japan’s exporters. The Nikkei is around 1% higher with big rises in consumer goods. Toyota and Honda are enjoying gains of around 3%.
Given the strength we are seeing in the Asian region, US and European markets are pointing towards gains at the open.
Apple
Very rarely will a single stock have such control on sentiment, but the numbers from Apple seem to have arrested the declining goodwill towards a Greek debt swap.
It’s hard to paint the numbers as anything but a blowout and clearly, despite reasonably elevated expectations, they simply took consensus down to the woodshed and chopped it apart.
You have to be impressed by the 37 million iPhones sold, which was well above the street’s expectations. However, you could just as easily highlight iPad and AppleTV sales, which were impressive relative to expectations.
This saw them beat consensus EPS by 36%, with a more modest 20% beat on the street’s forecast for revenue.
With the pipeline of new products one feels like traders are waiting to buy any dips, but at the same time fearing they may not eventuate.
Europe
The bull trend in S&P 500 futures continues to climb, although one suspects the Nasdaq is probably the index to be leveraged to in the short-term. With Asian markets seeing good support, we should see European bourses open on the front foot.
The EUR/USD spread betting market remains resilient despite it becoming more and more obvious that we are not going to get an agreement on the debt swap in the immediate near-term.
Clearly the mantra has shifted from ‘no news is good news’ in Europe to ‘no news is not good news anymore’, as whilst it seems like something has been agreed in the background, brinkmanship could still cause Greece to default.
The eyes of the market may be focused on Apple, but the bigger issue for everyone else will be on the FOMC meeting and how the USD and treasuries will react to the variety of outcomes that could be seen.
Truth be told, positioning yourself ahead of it is extremely difficult, but the theory is that the further out they see the first fed funds increase, the more likely QE3 will be announced this year.
It is amazing to think that despite a potential 3%+ Q4 GDP print, an abundance of liquidity still very much in the system and deflation still not an issue, the market is pricing in asset purchases sooner rather than later.
Traders will also be looking out for bond and bill auctions in Germany and Italy, whilst M&A activity in the pharmaceuticals space, with Roche putting in a hostile bid to acquire Illumina, should not do sentiment any harm either.
Ahead of the open we are calling the FTSE up 13 at 5765, the DAX up 30 at 6449 and the CAC up 10 at 3333.
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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"Shares Spread Betting: Greek Concerns Calmed by Outstanding Apple Performance" last update by AG, 25-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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