Shares Spread Betting Market Crisis Continues as Risk Aversion Spreads
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 5 August 2011: 11.15am Update
European markets are in full retreat once again, as the Eurozone crisis and slowing global growth fears cause investors to abandon risky assets.
As if there wasn’t enough to contend with, the monthly US non-farm payrolls report is released this afternoon, providing yet more excitement for beleaguered traders.
By 11am (London time), the FTSE 100 had fallen 2.9% to 5236.2, and the FTSE 250 was down 3% at 10248.5. In Europe, the DAX slumped 2.3% and the CAC was 1.3% lower, but the Spanish and Italian indices managed to stage a small rally.
Market rout
Shares spread betting markets have sustained further heavy losses this morning, as risk aversion grips investors. It is hard to escape the feeling that the various worries that have stalked markets for several months are finally converging to prompt a second crisis, just three years after the momentous events of 2008.
Investors barely had time to recover from the US debt ceiling drama before being hit by news of a slowing American economy and the continued implosion of the Eurozone.
With fantastic timing, markets must now contend with one of the most keenly-watched pieces of monthly economic data – US non-farm payrolls. These are forecast to show that the US economy added 85,000 jobs overall in July, with 113,000 new private jobs.
And yet, we all remember last month, when the data provided a spectacular disappointment, with only 18,000 jobs added. If this month’s data falls short of expectations, then we could well see even bigger losses in equity markets.
It’s also important to look out for revisions to the previous month’s number. The data has often been revised down of late, and the possibility exists that the US economy in fact lost jobs last month.
Banks tumble
Bank shares have been particularly hard-hit over the past few days, particularly since this week has seen the publication of first half results from all the major banks. Today saw RBS take its turn in the spotlight.
The bank, which is 84% owned by the British taxpayer (lucky us), moved into the red for the first six months of 2011, with a pre-tax loss of £794 million versus a £1.2 billion profit in the first half of 2010. The loss was primarily due to a £733 million provision for Greek debt and also £850 million allocated to cover the cost of payment protection insurance claims.
RBS shares dived 8.3% to 27.75p, while Barclays slumped a further 7% to 182.75p. Lloyds, whose shares plummeted 10% yesterday (and were at one point suspended from trading), declined 2.3% to 34.22p.
Growth fears smash miners
Global growth worries have hit miners once again, pushing many of the big names lower. ENRC led the way with a drop of 5.6% to 626p, while Xstrata lost 3% and Antofagasta shed 3.9%.
If the non-farms fail to meet expectations then fears of a second US recession will take centre-stage. A contraction in the world’s largest economy will be disastrous for the rest of the globe, so even heavier losses could be in store.
US pre-market
As mentioned, the key event of the day on the economic front is the non-farms data, published at 1.30pm (London time). US futures are down 0.7%, so more losses could be expected for US markets.
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 5 August 2011: 5.45am Update
In was a tumultuous night across equity markets as US indices collapsed, with the Dow Jones Industrial Average suffering its worst one-day fall since December 2008.
Investors are flooding out of equities and commodities amid grave uncertainties over the state of economic growth and ahead of tonight’s key employment data. The NASDAQ was the worst performer - down 5.1% - while the S&P 500 and Dow Jones Industrial Average lost 4.8% and 4.3% respectively.
Asia & Australia
Across Asia, regional markets are getting hammered after the plunge seen in world markets overnight. Participants are becoming very fearful of a global economic slowdown, led by the likes of Europe and the US as they succumb to their enormous levels of debt.
The Hang Seng is the worst performer - down 4.9% - while the Nikkei 225, Kospi and Shanghai Composite are all down between 1.9% and 3.6%.
In Australia, the ASX 200 is currently 3.9% weaker at 4110, having earlier traded to a low of 4087. You can’t say much other than it’s been a bloodbath today.
It seems all the fear and anxiety over the spreading of the European debt crisis to the larger nations of Italy and Spain - along with the dismal structural state of the US economy - collided last night, with the result being a global equities rout.
Losses have been indiscriminate; nothing has been spared, with all sectors down between 2.5% and 5.5%. The big questions on spread betting investors’ minds is what will happen across European and US markets today, and will there be any form of emergency policy response?
No support in the market
Equity markets are heading into the weekend break in a state of absolute panic, with traders' screens swamped by a sea of red. There's quite literally no support in the market despite previous assertions that even with the outlook so shaky, equities were left looking increasingly cheap. The obvious question everyone is now asking is precisely just how protracted this rout will be?
We can expect the focus to turn increasingly to the non-farm payrolls to see if a glimmer of hope can be found here, to push us back from the abyss. Something that tallies with the US labour data we've seen over the last couple of days may be enough to offer a degree of consolation, but a shortfall is likely to result, simply, in more joining the exodus.
Economic data
UK PPI data and Eurozone industrial production readings are also on the agenda today but under the weight of pessimism, there can be little expectation of these data points providing much influence.
Earnings continue apace as well, with Prudential, RBS and Old Mutual keeping the financial agenda ticking along in London, whilst sector peer Allianz is also reporting in Germany.
On the other side of the Atlantic, P&G and Viacom are amongst the highlights. Given the better-than-expected overall run of results we've seen from Wall Street so far, it's difficult to imagine just how the field would look now, had this been less upbeat.
Ahead of the open we're calling the FTSE down 102 at 5291, the DAX down 138 at 6277 and the CAC down 72 at 3248.
The FTSE's worst recorded weekly session was October 2008 when the index lost 1048 points. As of last night's close, the FTSE had lost 422 points since Monday.
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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"Shares Spread Betting Market Crisis Continues as Risk Aversion Spreads" last update by AG, 05-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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