Shell Share Spreads Rise as Third Quarter Profits Double
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 27 October 2011: 11.00am Update
Risk appetite surged this morning after European leaders in Brussels reached an agreement on a comprehensive list of actions, which aim to tackle the region’s sovereign debt crisis.
By 10am (London time), both the FTSE 100 and FTSE 250 rose over 2% to 5669.48 and 10,642.41 respectively. In Germany, the Dax was 3.72% up at 6239.65, while the French CAC surged 3.91% to 3293.50.
The Eurozone is saved
Stress on the Eurozone markets is retreating after leaders at yesterday’s EU summit reached an agreement and produced a plan to solve the region’s debt crisis.
Though little details were produced, markets are euphoric that the impasse has ended and progress has finally been made. The deal came amid mounting global pressure for the bloc to deliver a credible toolkit before next week’s G20 meeting in Cannes.
Eurozone leaders pledged to raise the European Financial Stability Facility fund’s firepower to €1 trillion. The terms are based on optimistic assumptions, which include Greece raising €15 billion in a privatisation programme.
This would also involve creating a special purpose investment vehicle to tap foreign sovereign and private investors, such as Chinese and Middle Eastern wealth funds, to buy bonds of troubled Eurozone countries.
The deal reached will also see private investors take a 50% cut in the face value of their bonds, a deep haircut that officials believe will reduce Greek debt levels to 120% of GDP by 2020.
A third bailout of €130 billion for Greece was also agreed upon. Additional plans include European banks finding €106 billion of extra capital by the end of June (€79 billion will be attributed to Greece, Spain, Italy and Portugal).
Separately, European data released this morning supported the current euphoric market sentiment as EU industrial and economic confidence for October was better than expected at -6.6 and 94.8, compared to forecasts of -7 and 93.8 respectively. EU consumer confidence came in as expected at -19.9.
Shell profits double
This morning, Royal Dutch Shell announced that its profits had doubled in the third quarter, thanks to higher oil prices, robust demand for gas and stronger refining margins, and said that it would continue to sell off non-core assets. Europe's largest oil company said its current net income was $7.2 billion, a 100% rise on the same period last year.
The company said that while production fell 2% to 3.01 million barrels of oil equivalent, excluding the sale of fields, the underlying trend was upward. Furthermore, the Japan earthquake earlier this year and subsequent shut down of nuclear plants boosted the demand for natural gas and liquefied natural gas, in which Shell is a market leader.
Shares in Shell surged over 2% this morning to a high of 2311p.
Virgin Media gets more customers
Virgin Media added 6300 new cable customers in the third quarter, which helped to reassure shares spread betting investors after a disappointing second quarter.
Shares fell in July when it surprisingly lost 36,000 customers, however the company’s strong third-quarter performance and the focus on higher-value customers saw average revenue per user rise 3.2% to almost £50.
This morning, the company announced that revenue in the third quarter was up 2.2% to £1 billion (which was in line with forecasts), while operating cash flow was up 2.8% to £398 million. Shares in the company were up 2.82% to 1750p this morning.
Clinton Cards continues to struggle
British cards and gift retailer Clinton Cards continues to struggle as it posted an 83% slump in its full-year profit. It has recently been hit by a combination of low consumer confidence and intense competition from supermarkets and the internet.
The retailer announced this morning that its adjusted operating profit came in at £3.2 million in the year to 31 July, down from £18.8 million, while revenue was down 7.6% to £364.2 million.
The firm’s new chief executive, who joined the group earlier this month, is conducting a strategic review, which initially aims to improve the in-store customer experience, the store portfolio, supply chain management and the firm's digital offering.
Shares in Clinton Cards, which have lost two thirds of their value over the last year, were up over 14% this morning at 12p.
US pre-market
US December futures are trading higher, with Dow futures up 1.42% and S&P futures 1.71%, suggesting that Wall Street will open in positive territory this afternoon.
At 1.30pm (London time) the US will release weekly US jobs data, real personal consumption expenditure figures, and preliminary GDP for the third quarter.
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 27 October 2011: 6.00am Update
US markets rallied overnight as European leaders reached an agreement on plans to recapitalise the banks.
Varying headlines coming out of Europe saw an extremely volatile trading session. Leaders are reportedly working towards a greatly leveraged bailout fund that China may invest in. German Chancellor Angela Merkel and French President Nicolas Sarkozy will now meet Greek creditors to resolve the terms of a debt write-down.
There had been initial weakness in Europe and the US as spread betting investors were concerned that talks to resolve Europe’s debt crisis had stalled. There was a swift turnaround, however, as soon as an agreement was reached.
With reports that China will buy bonds issued by the EFSF, risk appetite is returning to the market. On the economic front, sentiment was lifted by better–than-expected core durable goods orders and new home sales numbers in the US. Business expenditure on core capital goods climbed at their most rapid pace in six months.
Among the major averages, the Dow Jones Industrial Average advanced 1.4% to finish at 11869, the S&P climbed 1.1% to 1242, while the Nasdaq added 0.5% to 2651. Boeing led the gainers, jumping 4.5% after reporting a larger-than-expected quarterly profit.
Asia & Australia
Across Asia, regional markets are flying on reports that Europe has agreed to a 50% haircut on Greek debt for the banks.
This was supposedly the last hurdle to the European solution. With the final piece of the puzzle in place, it seems European member nations have put together a plan to avoid a default by Greece on its sovereign debt, and to restructure the region’s banking sector.
News of a greatly leveraged bailout fund and China’s reported involvement have been cheered by investors. A EUR106 billion recapitalisation for the banks has already been agreed to, and the news has seen risk assets fly off their lows.
The Hang Seng is leading the region with a 1.4% gain. Elsewhere in the region, the Nikkei and the Shanghai are up around 0.5% each.
In Australia, the ASX 200 was shut after a technical glitch this morning. Trading was halted soon after the open, and all trades that went through in the starting minutes before the market shut were put under review.
While some traders are wondering if the system crash has something to do with Thursday's expiry of October options contracts, the bulk of the volume generated by the expiry usually goes through the following day.
Other traders suspected the problem could be caused by the relocation of the ASX's data facility from Bondi to Gore Hill. Whatever the case was, the glitch highlights the need for an alternative exchange.
Stocks have flown out of the gates, with the index currently up 2.3% at 4340. Risk assets are quickly being snapped up in what seems to be a buying frenzy. The biggest gainers are currently the resource stocks, with BHP Billiton and Rio Tinto advancing around 3% each.
With only an hour of trading left, it is unlikely Australia will give up today’s gains. The downtrend resistance line, which has been in place since April, seems to have been well and truly broken. A break above the 4300 level is also a significant milestone for the Aussie market. The bulls will be looking for a close above 4300.
Europe
With solid progress having been made by European leaders in attempting to stem the debt crisis, equity markets have been charging ahead for the last few hours. On the surface there seems to be a great deal of support for the news but some are suggesting the detail is still lacking.
That said, European equity markets are currently eyeing bumper gains at the open, but the question is whether these can be sustained in the longer term, as the market keeps pushing back to levels not seen since the early August sell-off.
Interpretation of the news - and any information regarding further instalments - will doubtless be front of mind for the majority, but there are also a few highlights on the economic calendar today. US Q3 GDP readings plus the Eurozone consumer confidence number will both be under scrutiny, whilst earnings season remains in full flow, especially across the Atlantic.
Ahead of the open we're calling the FTSE up 94 at 5647, the DAX up 131 at 6147 and the CAC up 82 at 3252.
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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"Shell Share Spreads Rise as Third Quarter Profits Double" last update by AG, 27-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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