Spread Betting 20 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 20 August 2010: 11.30am Update
A bearish mood dominated equity markets this morning, as yesterday's weak US manufacturing survey and bleak labour market report cast a shadow of doubt on the US economic recovery, encouraging cautious investors to reduce their exposure to risky assets.
Investor sentiment remains weak after data released yesterday in the US showed an increase in the number of Americans claiming first-time unemployment benefits, while a separate report indicated that manufacturing activity in the Philadelphia region is beginning to contract.
The disappointing data saw US equities tumble, and the FTSE continued on the downward the trend this morning. With no major economic updates for the market to digest today, it may be difficult for the market to shift from yesterday's negative tone.
By 11am (London time) the FTSE 100 index was 29.14 points (-0.56%) lower at 5182.15, and the FTSE 250 had fallen 98.50 points (-1.01%) to 9736.58.
It has been a big week for mergers and acquisitions, and the activity continued this morning after Korea National Oil Corp (KNOC) went hostile with its bid for Dana Petroleum. KNOC had previously made a bid for Dana at 1800 pence a share, however discussions faltered after KNOC refused to sign a non-disclosure agreement that was crucial if Dana was going to hand over confidential operational information for KNOC to review.
Following the breakdown in talks, KNOC has now directly approached Dana's shareholders and has reportedly obtained the support of 49% of the shareholders for the deal to go ahead. The proposed deal is valued at $2.9 billion and saw shares in Dana jump 5.5% to 1788p this morning.
HP and Dell reported quarterly earnings overnight, after the US market closed. HP, which has been hit recently with the exit of its highly regarded CEO Mark Hurd, posted an 11% increase in headline revenues and a 6% increase in net income for the third quarter.
Full-year earnings are expected to remain the same as previously advised, at $4.49 to $4.51 a share. Shares in HP closed at $40.76 last night, with after-market trading pointing to a 1% drop on the open.
Meanwhile, Dell's second-quarter results were mixed, which may see the stock suffer when it opens later this afternoon. Sales gained 22% in the second quarter, which exceeded expectations, and the forecast for the third-quarter sales of $15.7 billion was also ahead of analyst forecasts. However, gross margins narrowed to 17%, missing expectations of 18%. In after-hours trading Dell shares fell 2.82% to $11.70.
The US Dollar was broadly stronger, with the US Dollar Index gaining 0.42% to 82.797. Sterling fell around 0.5% to $1.5525 against the US Dollar as a withdrawal from riskier currencies saw the US Dollar benefit.
The Euro plunged 0.8% to $1.2715 after European Central Bank (ECB) member Axel Weber signalled that European banks may need access to ECB liquidity longer than expected. Interestingly, the US Dollar also gained against the Yen to trade at ¥85.40.
The Australian Dollar slipped against its US counterpart, falling to $0.8890. AUD/USD will be one to watch as over the weekend, as Australians go to the voting booth for an election which could see a new political party come to power. The polls are now neck and neck, and there is the chance of a hung parliament.
Next week could be an interesting week for equities since a number of important economic releases will be published, including US home sales, European industrial orders and German business confidence. Unfortunately, however, in my opinion the data is most likely to confirm that conditions remain challenging across developed nations.
With September traditionally a rough time for equities, particularly when there is so much nervousness among investors, next week could be a prelude for further difficult times.
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 20 August 2010: 06.30am Update
On Wall Street overnight, US stocks tumbled on the back of weaker-than-expected economic data.
Unemployment claims unexpectedly jumped to the highest level in nine months and the Philadelphia Fed survey showed manufacturing had shrunk to its lowest level in 13 months. Unsurprisingly, this spurred concerns that the US economy was slowing faster than initially thought.
The broad-based S&P 500 and tech-heavy NASDAQ were the worst performers, both down 1.7% while the Dow Jones fell 1.4%.
In Asia, regional markets are all lower following bearish US leads after weaker-than-expected US economic data heightened worries about the possibility of a second recession in the world’s biggest economy.
As at 06:00, the Nikkei 225 is the worst performer, down 1.8% while the Hang Seng, Kospi and Shanghai Composite are all lower between 0.5% and 1.3%.
In Australia, the ASX 200 is 1.2% weaker at 4420, right on its lows of the day. Losses for the day are both heavy and broad-based, with nearly all sectors experiencing falls of well over 1%; investors are seemingly happy to move to the sidelines to await the outcome of this weekend’s federal election. A disappointing 2011 outlook from surf retailer Billabong is seeing the consumer discretionary sector as the day’s worst performer.
Turning our attention to Europe, if ever there was a session lacking in fundamentals then the coming hours in Europe and the US is it, with next to nothing of note on the economic or blue chip corporate agendas. Having said that, miners may see some movement ahead of the tightly contested Australian election, as the outcome could mark the end of the controversial mining tax plan.
Otherwise it's all going to be about sentiment, obviously some fair chunks of cash have come off the table in the last 24 hours but with the prospect of thin volumes leading to even more volatility, the temptation could well be to maintain the defensive stance.
Ahead of the open we're calling the FTSE down 9 at 5202, the DAX down 18 at 6057 and the CAC down 12 at 3560.
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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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 20 Aug 2010" last update by AG, 20-Aug-2010
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