Spread Betting 19 Oct 2010
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For today's update see Spread Betting.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 19 October 2010: 10.30am Update
The FTSE was trading flat this morning, with broad declines in the mining sector countering gains in the banking sector. Investors were cautious following disappointing results from US bellwethers Apple and IBM, and ahead of tomorrow's government spending review.
Overnight, the financial spread betting markets saw Apple and IBM release their quarterly earnings after the closing bell. While both companies surpassed earnings expectations, they underperformed in key aspects of their business.
Firstly, Apple saw fourth-quarter earnings rise 70% to $4.31 billion, or $4.64 a share off the back of bumper iPhone sales. However, sales of the much talked about iPad missed expectations after they sold 4.19 million units, below consensus estimates of 4.5 million.
Projected earnings for the current quarter were also conservative at $4.80 a share, falling short of the predicted $5.03 by analysts surveyed by Bloomberg. Shares in Apple slumped 5.12% to $301.72 in afterhours trading.
IBM suffered a similar blow, dropping 2.46% to $139.31. Net income in the third quarter rose 12% to $3.59 billion, or $2.82 a share, topping estimates of $2.75 a share. Sales narrowly beat expectations rising 3% to $24.3 billion.
The company fell short, however, in their service signings, which fell 7% to $11 billion. The drop in signings doesn't bode well for the general economy, as it suggests large corporations are holding off on large outsourcing projects. This is a concern for IBM as signings account for around 60% of its revenue.
With both of these tech giants reporting mixed results, the FTSE 100 opened in the red this morning. The setback in Apple's iPad sales dragged on ARM Holdings, which licenses the chips that go into the iPhone and iPad. ARM was the biggest faller on the FTSE 100 losing 2.43% to 389.40p.
By 10.25am (London time) the FTSE 100 was close to unchanged, rising 3.19 points (+0.06%) to 5745.71, while the FTSE 250 rose 14.37 points (+0.13%) to 10889.46.
Further weighing on the index was the continued rebound in the US dollar, which saw metal commodities lose ground this morning. This saw BHP decline 0.75%, Anglo American fall 0.63% and Xstrata shed 1.8%. Xstrata issued an interim management statement this morning - the company said 'Strong momentum for coal, copper and nickel volumes was seen in the third quarter over the previous quarter.' [1]
The banks were able to buck the negative trend and were broadly stronger this morning. Earnings results from Citigroup are still buoying the sector, but an important test will come this afternoon when Goldman Sachs and Bank of America report their quarterly earnings. Royal Bank of Scotland added 1.97%, Barclays rose 1.69%, while HSBC gained 0.89%.
UK investors are also cautious ahead of tomorrow's government spending review and the Bank of England's minutes. The government will be laying out the details of the spending cuts it announced in the emergency budget in June. The Bank of England minutes are also expected to provide more details on their stance on quantitative easing.
Speculation has increased that the central bank is considering further QE to support the economy, and investors will be looking for confirmation of that in the minutes. BoE Governor Mervyn King is expected to make a speech tonight at 7.50pm (London time), which may also shed more light on the matter.
Source:
[1] Xstrata website (19 October 2010)
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.
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 19 October 2010: 6.30am Update
Overnight, US markets posted convincing gains on the back of better-than-expected earnings from Citigroup and subsiding fears over a foreclosure crisis, with financial stocks leading the market higher.
The Dow Jones Industrial Average advanced 0.7%, as did the S&P 500. The NASDAQ saw more muted gains of 0.3% having significantly outperformed in the previous session.
Whilst the cash session was positive, the after-hours price action may be of interest to European traders. IBM, who have a 10% weight on the Dow Jones, pulled back more than 3%, despite beating the market’s forecasts on third-quarter estimates.
The USD resumed its downward trend after a weaker-than-expected read on industrial production confirmed the need for more stimulus from the Fed.
Traders focused more on its reported drop in new services contracts. Apple as well saw heavy selling after it reported a poor outlook on first quarter earnings.
Across Asia, regional markets are mainly higher led by a strong performance from bank stocks which are advancing in line with US leads. As at 06:00, the Hang Seng is the region’s best performer, rising 0.5% while the Nikkei 225 is 0.2% firmer. Elsewhere, the Shanghai Composite and the Kospi are both marginally lower.
In Australia, the ASX 200 closed 0.2% firmer at 4660, just off its earlier highs of 4681. Gains for the day are broad based with the materials, industrials, financials and energy sectors all convincingly higher. The telecoms and healthcare sectors are the only losers on the day.
It seems like we are in for a softer start in Europe although there is plenty of event risk to keep your eye on. The online spread betting markets will be eagerly awaiting numbers from BoA and Goldman’s before the bell, while Johnson & Johnson, Coca Cola and Yahoo are some of the other high profile names due today.
The UK agenda looks somewhat quiet however as traders await the potentially volatile session on Wednesday with some big economic releases due in the shape of the MPC meeting minutes and also the government spending review.
Interims from Whitbread will lead on the earnings calendar and full year numbers from Bellway will offer some insight to the home building market, whilst the CBI industrial trends survey has in the past provided some momentum for stocks too.
Ahead of the open we're calling the FTSE down 15 at 5728, the DAX down 5 at 6512 and the CAC down 13 at 3821.
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.
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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"Spread Betting 19 Oct 2010" last update by AG, 19-Oct-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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