Spread Betting 10 Nov 2008
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech - Research Analyst, IG Index.
Spread Betting 10 Nov 08
Equity markets in Britain and Europe rose this morning after China announced a $586 billion economic stimulus package.
Hong Kong's Hang Seng jumped 501.2 points (+3.52%) to 14744.63 and Tokyo’s Nikkei 225 soared 498.43 points (+5.81%) to 9081.43 after China joined governments and central banks in their objective to avert a global recession and revamp money markets. The world’s fourth-largest economy last night approved a $586 billion government spending package to boost domestic demand.
The approval of this stimulus package, along with the prospect of further coordinated rate cuts, has improved the outlook for commodity demand and lifted heavy-weight resource shares this morning.
'The main driver has been the Chinese stimulus package as there has been a lot of concern that the global recession would be worsened by slowing Chinese GDP growth,' said Richard Hunter, head of UK equities at Hargreaves Lansdown. '(The stimulus package) is having an impact on mining stocks on the demand story, but stocks are up pretty much across the board.' [1]
By around 10.15am (London time) London's blue-chip FTSE 100 Index was up 145.21 points (+3.33%) at 4510.17 and the broader FTSE 250 was 198.52 points (+3.01%) above its previous close at 6784.10. In Germany, the Dax 30 was up 159.65 points (+3.23%) at 5098.11 and the CAC 40 was 122.6 points higher (+3.53%) at 3591.72.
A rally in mining and energy stocks contributed to the rise in equity markets. Rio Tinto was at the top of the FTSE 100 leader board this morning, up by 15.86% at 3033p a share and BHP Billiton, in second place, climbed 14.98% to 1167p. Xstrata, Anglo American, and Antofagasta had advanced 14.89% to 1227p, 14.67% to 1548p and 13.8% to 423p respectively.
In the energy sector, Royal Dutch Shell shares rose around 5% to 1776p, BG Group was 4.44% higher at 1023p and BP was 3.98% above its previous close at 535.5p by mid-morning.
A few banking shares also prospered, with Barclays up 3.61% to 195p, HBOS rising 6.62% to 111.2p and Lloyds TSB up 0.5% to 201.5p. Over the weekend, the Times newspaper reported that Standard Life, a leading shareholder in HBOS and Lloyds, said it was looking at other proposals which could derail the £12 billion merger of the two lenders. [2]
In contrast, RBS lost 3.13% of its value, Standard Chartered fell 3.24% and HSBC dropped 0.4% to 743.5 after announcing a larger-than-expected writedown of $4.3 billion.
HSBC's writedown was attributable to devalued US loan defaults and was higher than Bloomberg's median estimate of $3.7 billion. Despite the ongoing turmoil, analysts polled by Reuters expect HSBC to post a 2008 full-year pre-tax profit of $21.7 billion, down by just 10% from its record $24.2 billion in 2007.
HSBC's Chairman Stephen Green had, last month, reassured investors that the bank has sufficient capital to continue operating normally and has no plans to get assistance from the UK government.
Elsewhere, Cable & Wireless rose 3.9% at 140p after increasing its annual profit guidance following the release of stronger-than-anticipated interim earnings. The UK's second-biggest corporate telecoms provider after BT has also postponed a decision on its future corporate structure, a situation which could have led to a demerger.
Mobile telecommunications services provider Inmarsat also made the headlines today after reporting a 16.4% rise in third-quarter revenue to $162.5 million. The better-than-expected performance was attributable to strong demand for its shipping and in-flight services. Inmarsat was up 0.9% to 398.25p.
On the economic front, further data points to a sharp decline in inflation. This morning, the producer price index (PPI input) for October fell 5.6% on the month after falling 1.2% the month before. On a year-on-year basis, PPI input prices were up by 13.8% compared with a 24.5% gain in September.
PPI output data also fell, with the month-on-month figure retreating 1% compared to a 0.3% decline the month before. On the year, PPI output prices were up 6.8% compared to an 8.5% gain in September. The decline in Britain's inflationary pressure may pave the way for further interest-rate cuts going forward.
Looking ahead to the US, December Dow and S&P futures contracts were up by around 2.8% this morning, indicating that, as things stand, Wall St is likely to have a positive start this afternoon.
[1] Source: Reuters News (10 Nov 2008)
[2] Source: Reuters News (10 Nov 2008)
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 10 Nov 2008" written by AG, last updated 10-Nov-2008
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