Spread Betting 23 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 23 August 2010: 06.30am Update
The inconclusive Australian election result boosted miners in London this morning, over hopes that a proposed mining tax will be dropped, with banks also pushing the FTSE 100 higher as a result of M&A news.
The uncertain election result in Australia over the weekend caused a rise in mining stocks in morning trading, due to the increased likelihood that the proposed mining tax will be scrapped.
Both incumbent Prime Minister Julia Gillard and opposition leader Tony Abbott failed to secure a majority and will now look to independent MPs for support.
Miners gained ground in the expectation that a new government would cancel the super tax. Australian miners BHP Billiton and Rio Tinto surged 1.73% to 1852.5p and 1.61% to 3337.5p respectively.
BHP shares moved higher despite ongoing uncertainty over its bid for Canadian potash firm PotashCorp, with reports in Bloomberg suggesting that PotashCorp had been contacted by China's Sinochem Group and Brazil's Vale.
A bid by Sinochem, which is state-owned, would indicate that China is wary about allowing an Australian firm to acquire control over the flow of vital agricultural commodities to China, given years of tensions over the price of iron ore. [1]
Meanwhile, BHP has launched a 'charm offensive' in Canada in order to convince PotashCorp shareholders and Canadian regulators that the merger will be a 'net benefit' to the federation.
Banks were lifted by news that HSBC was planning to buy up to 70% of South African firm Nedbank. The deal, worth around $6.8 billion, would give Europe's largest bank an entry point into the fast-growing African market.
HSBC added 0.87% to reach 639.6p, while Lloyds rose 1.28% to 70.18p and RBS gained 1.39% to 46.05p. Old Mutual, which owns a majority stake in Nedbank, jumped 4.38% to 126.3p on the news.
Pre-tax profit in the first half of 2010 at oil and gas facilities firm Petrofac soared 122% to $388 million. The company's shares rose 2% to 1389p on forecasts of a 20% rise in net profit for 2010 as its backlog of contracts continued to grow, including its first contract in Iraq.
Petrofac said that the work in Iraq was potentially worth hundreds of millions of Dollars and is expected to lead to a larger contract award in the second half of the year.
Homebuilder Bovis Homes saw the benefit of investment in new land as it announced pre-tax profits of £3.5 million for the first six months of 2010. The firm, which suffered a loss of £8.6 million for the same period in 2009, added 1874 plots to its land bank and said that it planned a return to dividend payments at the end of 2010 as confidence returns to the housing industry. The shares were nudged ahead by 0.17% to 349p during morning trading.
By 10.30am (London time), the FTSE 100 had risen 22.98 points (0.44%) to 5218.26 and the FTSE 250 pushed forward 48.94 points (0.5%) to 9810.09.
Business conditions in the Eurozone deteriorated slightly in August, according to the Purchasing Manager Indices for manufacturing and services. The manufacturing index reading was 55, below economist expectations for a figure of 56.7, and the services index was just below expectations of 55.8 with a reading of 55.6.
The manufacturing figure will be the more important of the two, as manufacturing forms a larger part of total Eurozone GDP. A reading above 50 signals expansion.
Influential think tank Policy Exchange issued a stark warning this morning as it suggested that UK interest rates would hit 8% by 2012 in order to combat rampant inflation. Chief Economist Andrew Lilico argued that an economic recovery would release a wave of money, causing a wave of inflation. Lilico expects a double-dip recession followed swiftly by an economic boom caused by further quantitative easing in the UK and US and deep government spending cuts. [3]
Both Sterling and the Euro were slightly lower against the US Dollar in morning trading, reaching $1.5536 and $1.2697 by 10.35am (London time). The Yen reached a high of ¥85.68 against the US Dollar ahead of reports later this week that are expected to show a slowdown in both US home sales and Japanese export growth.
The Australian Dollar shrugged off earlier losses to surge 0.74% against the US Dollar, hitting $0.8930 as markets began to hope that a change of government would lead to the demise of the planned mining tax.
Looking ahead to this afternoon, no economic data is expected from the United States, although the Eurozone will publish its August consumer confidence figures at 3pm London time.
As of 10.30am (London time), the September futures for the Dow and S&P 500 are indicating a gain on opening, up 0.23% and 0.29% respectively.
Sources: [1] Bloomberg News, 23 August 2010,
Sources: [2] Wall Street Journal, 23 August 2010,
Sources: [3] BBC News, 23 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 23 Aug 2010" last update by AG, 23-Aug-2010
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