Spread Betting 26 Feb 2010
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For today's update see Spread Betting.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 26 February 2010
It has been a positive day so far, with the FTSE 100 regaining its composure following an overnight rebound on Wall Street, which helped lure investors back to the market in search of value following a volatile a week.
The blue-chip Index rallied over 1% to 5334.70, but began paring gains by mid-morning, despite an upward revision in the fourth-quarter UK GDP figures.
Have the disappointing results from Lloyds Banking Group and unexpected drop in UK house prices started to take its toll on market morale?
By 10.35am, the FTSE 100 was trading at 5331.74, representing a 53.52 point (+1%) rise from yesterday's close. In addition, the broader FTSE 250 was 94.51 points (+1%) higher at 9321.39.
Investors heaved a sigh of relief after official data released from the Office for National Statistics revealed that the UK economy expanded 0.3% in the fourth quarter, beating the ONS' initial 0.1% estimate and the 0.2% median forecast shown in a Bloomberg survey.
The UK economy managed to exit the recession at a faster pace than expected following a stronger growth in the UK's dominant services sector.
The year-on-year GDP figure showed a 3.3% decline, however, marginally bigger than expected due to downward revisions to previous data.
Overall, the GDP figures are encouraging, but that's history – there's very little sign of the momentum seen in the fourth quarter continuing into the first quarter of 2010 unfortunately.
Separate figures showed an unexpected drop in UK house prices in February. Nationwide said house prices fell 1%, confounding analysts who were anticipating a 0.4% increase. The latest drop ends nine consecutive monthly increases.
'In light of low growth in household incomes and elevated levels of unemployment, house prices were beginning to move ahead of the recovery in general economic conditions,' said Martin Gahbauer, Nationwide's Chief Economist.
'With the longer term stability of the market in mind, it would be a positive development for house prices not to become decoupled from the economic fundamentals,' he added.
'A pause in the upward trend will also be a relief to potential first-time buyers who are no longer benefiting from the stamp duty holiday and for whom affordability had begun to deteriorate again over the course of 2009.' [1]
Elsewhere, Lloyds Banking Group was in the limelight this morning. Its shares retreated 3.2% to 53.13p after posting a wider-than-expected full-year loss following a significant rise in loan losses in 2009.
The bank's pre-tax loss narrowed to £6.3 billion from £6.7 billion, missing the £6.1 billion median loss shown in a Bloomberg survey.
In addition, bad loans came in at £24 billion, predominantly as a result of the bank's takeover of HBOS. On an encouraging note, the bank said it saw 'further significant reductions' in impairments in 2010 and beyond.
Sector peers Royal Bank of Scotland fell 1.5% to 37.82p while Barclays, Standard Chartered and HSBC climbed traded between 1.4% and 1.8% higher. Investors should note that HSBC will report its earnings on Monday.
In separate news, outsourcing group Serco Group jumped to the top of the FTSE 100 leader board this morning, rallying 7.2% to 559p after unveiling a 27% rise in revenues and a 30% jump in profit for 2009. The company also ended the year with a record order book.
Lower down the market, shares in property website Rightmove jumped 8.9% to 651p after reporting better-than-expected profit and saying that it remains confident of its future success.
Looking ahead, March Dow and S&P 500 futures were higher, suggesting a positive start on Wall Street this afternoon.
Investors should keep an eye out for the fourth-quarter US GDP figures today, which are due out at 1.30pm (London time).
In addition, the Chicago Purchasing Managers' Index will be released at 2.45pm, followed by the Reuters/Michigan consumer sentiment index at 2.55pm and existing home sales data at 3pm.
[1] Source: Reuters News (26 February 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 26 Feb 2010" last update by AG, 26-Feb-2010
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