Spread Betting 18 Aug 2010
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For today's update see Spread Betting.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 18 August 2010: 12.00pm Update
The MPC minutes created a mixed reaction among markets this morning, by raising fears that it would not be extending its qualitative easing programme beyond the £125bn already committed.
Economists had expected the minutes to show that the Committee had discussed extending its purchases to the limit of £150 billion set by the Chancellor in March, but instead, the unanimous conclusion was that there was not enough evidence that this was necessary. Gilt yields rose immediately after the news, reflecting a lower demand.
The minutes also revealed that the Committee again voted 7-1 against raising interest rates. This is the third consecutive month that member Andrew Sentance has voted to raise the rate to 0.75%, citing high inflation as the driver. Governor Mervyn King will now need to write his third letter of the year to the Government to explain why inflation is still above the 2% target.
The FTSE opened lower this morning, lead mainly by weaker bankers and miners. By 10.45am the UK's leading index was down 28.12 points (0.53%) at 5322.43. Intertek Group led the morning's winners, after the MSCI announced that the company would be added to their prestigious World Index at the end of this month.
Eurasian Natural Resources was the biggest faller in the morning's trading, down 21.50 points (2.22%) to 946.50p by 10.45am despite revealing a rise in pre-tax earnings of more than £1.4bn (£919m) during the first half of 2010.
The mining group's losses this morning can largely be attributed to fears of fluctuating commodity prices over the next few months, with chief executive Felix Vulis stating 'We remain positive about the longer-term prospects for Eurasian Natural Resources, but there is a risk of commodity market volatility in the near term and the management of costs remains a challenge.' [1]
BHP Billiton also dropped this morning, after launching a $40 billion (£25.8 billion) hostile takeover bid for Potash Corp, equal to their offer of $130 per share that was rejected by the fertiliser company yesterday.
BHP is seeking to become the world's biggest fertiliser producer and take advantage of rising demand for food, in particular protein. Prices for corn, soybeans and wheat have risen by as much as 40% since June, with further consumption of potash expected. Potash Corp reached $143.17 on Wall Street yesterday, indicating that BHP may need to raise its offer to be in with a chance of winning over investors. [2]
Kiss Flights this morning became the latest British travel company to fold, affecting up to 70,000 holidaymakers. This marks the thirteenth UK travel firm to collapse this year; a result of the recession, reduced spending and the volcanic ash cloud earlier this year.
British Airways is enjoying an upturn in fortunes, however, after managing to avert the latest set of planned strikes. At 10.45am the airline was up 3.70 points (1.67%) at 224.90p.
European stocks made a weak start to the morning, the first negative direction for five days. The Stoxx Europe 600 had declined 0.1% at 10.45am (London time) amid concerns that the US economy is wobbling under the pressure. Economists are also concerned that many member countries will have difficulty reducing their deficits.
The Pound hiked this morning on the back of this morning's MPC revelations, gaining ground against 15 of its 16 most active pairings.
Sterling rose 0.4 percent to $1.5646 at 10.45am (London time), after falling to $1.5499 earlier, its lowest level since late July. Against the Euro, Sterling made modest gains, up 0.2 percent to 82.51p.
Weekly crude oil inventories should generate some interest in the US later, after oil prices fell on the back of an industry report showing that US crude and gasoline stockpiles are far higher than normal for the time of year, doing nothing to allay fears of a double dip.
Source: [1] Bloomberg News (18 August 2010),
Source: [2] Bloomberg News (18 August 2010).
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 18 August 2010: 06.30am Update
On the Wall Street spread trading markets overnight, largely stronger-than-expected economic data saw the major US indices move higher, with the Dow snapping a five-day losing streak.
Gains were also helped by profits beating estimates, as well as BHP’s $39 billion bid for Potash which sparked a rally in agricultural companies.
Once again, the tech-heavy NASDAQ was the top performer, rising 1.3% while the S&P 500 and Dow Jones Industrial Average added 1.2% and 1% respectively.
Across Asia, regional markets are mixed this Wednesday despite good overnight leads from the US. Stronger-than-expected industrial production numbers and results from Walmart and Home Depot helped the major indices post their biggest gains in two weeks.
As of 06:00, the Nikkei and Kospi are higher by 0.3% and 0.2% respectively while the Hang Seng and Shanghai Composite are both down 0.3%.
In Australia, the ASX 200 is 0.3% weaker, only a few points from its session lows and well off the early-session high of 4494. After yesterday’s outperformance it’s not surprising Australia is seeing underperforming global leads, especially given the selling seen in BHP following its bid for Potash.
The material, healthcare and consumer discretionary sectors are doing most of the damage energy and consumer staples names are seeing gains.
Yesterday's bumper gains in Europe are looking like something of a one-off right now, with markets on both sides of the Atlantic eyeing softer starts to Wednesday's trade. The limited fundamental data we saw yesterday, especially out of the US, and rising commodity spreads was sufficient to cheer traders to push many of the major indices over 1% higher, though an air of caution could now easily return to markets.
It's also worth underlining the lower-than-average trade volumes being seen in the underlying market right now, so this could well be overstating any upside.
Once again there's a scattering of fundamentals due today. The Bank of England inflation report and earnings news from ENRC are two of the higher profile events in London, whilst earnings from another US retailer, Target, will again be closely followed. Other than that however, traders may be left scratching around a little in an attempt to find any meaningful direction.
UK retail sales tomorrow may be able to add some additional momentum but ahead of the open we're calling the FTSE down 24 at 5327, the DAX down 18 at 6188 and the CAC down 13 at 3650.
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 18 Aug 2010" last update by AG, 18-Aug-2010
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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