Shares Spread Betting: Tesco Shares Fall 12% After Issuing Profit Warning
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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 January 2011: 10.15am Update
European markets rallied this morning following a Spanish bond auction which sold twice as much debt as planned, and after Chinese data further pointed to possible monetary policy easing from the nation’s central bank.
Looking ahead to this afternoon, spread betting investors are awaiting interest rate decisions from the Bank of England and the European Central Bank.
By 10am (London time), the FTSE 100 was up 0.37% at 5691.91, while the broader FTSE 250 jumped 0.7% to 10,444.65. Elsewhere, the German DAX was up 1.16% and the Spanish IBEX jumped over 1% to 8522.80.
China’s inflation eases
Data released today showed China's inflation rate eased to a 15-month low in December. However, sticky food prices are a reminder of the risks the government is weighing as it tilts policy towards boosting growth, as internal and external demand for Chinese goods falters.
Consumer price inflation rose 4.1% from a year earlier, just ahead of market expectations of 4%, and helps to reinforce the view that the central bank is poised to ease monetary policy.
In month-on-month terms, the consumer price index rose 0.3% in December from November, after a 0.2% fall in November.
The annual rate of food inflation jumped to 9.1% in December from 8.8% in November. Meanwhile, the annual rate of producer price inflation came in at 1.7% and underscores the potential for downside for corporate China.
Tesco plunges on profit warning
Tesco, the world's third-biggest retailer, issued a profit warning this morning after reporting its worst Christmas sales performance for decades.
Tesco announced that it expects 2012 to be broadly similar to 2011, which saw its shares drop 12% to a 32-month low of 339.5p, erasing £3.7 billion off its value.
Tesco said it expected minimal profit growth in the year to February 2013, compared with a market forecast for a 10% rise.
Separately, in the six weeks to 7 January, sales, excluding fuel and VAT sales tax, fell 2.3% at British stores that have been open for a year.
The company blames some of the weak performance on its ‘Big Price Drop’ campaign, which it launched in September 2011. Having said that, the company announced that it still plans to cut more prices in the months ahead in an attempt to lure in cash-strapped shoppers from rival supermarkets.
In an effort to cut back on costs, Tesco also said that it would rein in openings of big hypermarkets as consumers cut back on big shopping trips.
Tesco's warning was accompanied by a raft of weak trading updates from British store groups including ‘Home Retail’s Argos, Halfords and Mothercare, which underscore how Britons have been cutting back spending on non-essential goods.
Home Retail, Britain's biggest household goods retailer, posted an 8.8% drop in underlying sales at its Argos stores and said that it would cut its dividend, while Halfords and Mothercare also reported falling sales.
Looking ahead
US futures are pointing to a mixed open on Wall Street this afternoon, with the Dow currently expected to start 12 points lower at 12,376.00 and the S&P 500 kicking off 3.2 points higher at 1291.40.
On the economic data front, US retail sales are due at 1.30pm (London time) alongside jobless claims figures, while at 2.45pm (London time) the US consumer comfort index will be released.
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 January 2012: 6.00am Update
Overnight, US markets finished relatively flat, consolidating the previous session’s healthy gains, as investors continued to weigh up the improving prospects of the US economy against the ongoing issues out of Europe.
Among the major averages, the Dow Jones Industrial Average shed 0.1% to close at 12,449, the S&P was flat at 1292, while the NASDAQ added 0.3% to finish at 2710.
Among the major S&P sectors, materials, industrial and financial names were again the best performers, while energy slipped on the session.
Last night was a fairly benign session for Wall Street. Shares have had a relatively positive start to the year, but investors seem to be debating the question, ‘where to from here?’
Hopefully by the conclusion of the current US reporting season and the swag of European ‘meetings’ scheduled to take place over the next few weeks, everyone will be in a more informed position to make that call.
Last night, the Fed’s Beige Book confirmed what recent economic data has been telling us, the US economy is on a slow path to recovery.
According to the Fed, the economy ’expanded at a modest to moderate pace‘ from late November through to the end of December. Most districts reported a mild pick-up in activity, although across the board there was ’limited permanent hiring‘ and the housing market remained ’sluggish‘.
Elsewhere, US treasuries extended their gains after a government auction of $21 billion of 10-year notes at a yield of 1.9% and a bid-to-cover ratio of 3.29.
The strength of the cover and the 10-year yield remaining below 2% still suggests a high appetite for bonds. Unfortunately, while investors are still hoarding cash in bonds, the upside for equity markets may be limited in the short term.
Asia and Australia
Across Asia, regional markets are mainly higher after a flat finish on Wall Street and despite Chinese inflation data being marginally above forecast.
The Shanghai Composite is the region’s best performer, higher by 0.7%, while the Hang Seng and the Kospi are both enjoying gains of 0.3%. Elsewhere, the Nikkei 225 is bucking the trend to be lower by 0.6%.
In Australia, the ASX 200 is currently 0.4% weaker at 4170, just off its session low of 4167 and well below its earlier session high of 4196.
Earlier gains have given way to disappointment that China’s consumer price inflation reading failed to fall below 4%, actual 4.1%, watering down expectations, perhaps incorrectly, that China was close to cutting its reserve rate ratio to stimulate domestic growth.
Property trusts and consumer discretionary names are leading the day’s best performers; materials have reversed gains to be flat, while the energy and financial sectors are firmly in negative territory.
Europe
Looking ahead, today’s European session shapes up as an interesting one. Central bank rate decisions out of the BoE and the ECB are set to dictate trading action.
Any surprise cut by the ECB would certainly be negative for the euro / dollar spread betting market. However, perhaps more importantly, it could spark an equities rally that would propel the S&P 500 through that 1292 resistance level, previous high from late October, and beyond 1300 for the first time since 1 August 2011. Should this happen, many participants will view the market through more optimistic eyes.
European markets look set to open on the front foot, although the event risk really kicks into gear tonight.
The FTSE has broken downtrend resistance from July 22 but as we have seen in recent sessions a close above the October high of 5747 seems the more elusive target.
The interesting thing though if you look at price action on the S&P is that despite all the concerns in Europe a clear uptrend is underway and it looks quite clear that traders want to push prices higher.
Ahead of the open we are calling the FTSE at 5679 +9, the DAX at 6166 +14 and the CAC at 3219 +15.
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: Tesco Shares Fall 12% After Issuing Profit Warning" last update by AG, 12-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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