Spread Betting 27 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 27 August 2010: 12.00pm Update
Better-than-expected growth in the UK economy wasn't enough to lift the FTSE 100 this morning, as a degree of caution remains ahead of Fed Chairman Ben Bernanke's speech this afternoon and investors await the release of US second-quarter GDP.
The Office for National Statistics upwardly revised the UK's second quarter GDP to 1.2% this morning, off the back of stronger growth in the construction sector than previously anticipated. According to Reuters, this is the fastest growth the UK has seen in nine years.
Economists were expecting GDP to remain unchanged at 1.1% for the quarter. The better-than-expected result did little to lift the FTSE 100 this morning as overarching concerns over the health of the global economy was more of a concern for the companies that make up this index. However, the result did pull the broader-based and more domestically oriented FTSE 250 into positive territory.
By 11am (London time) the FTSE 100 had recovered from earlier losses, but was still trading 4.77 points (-0.09%) below its previous close at 5151.07. The FTSE 250 was 29.39 points (+0.30%) higher at 9707.33.
Helping the FTSE 250 higher today was a better-than-expected first-half from property website Rightmove. The company reported a 40% increase in first-half operating profit, to £27.9 million on revenue of £42.3 million.
This came ahead of expectations from analysts polled by Reuters, who were anticipating operating profit to be £25.9 million on revenue of £41 million. Rightmove rose 1.21% to 629.50p this morning.
Dana Petroleum was another FTSE 250 constituent to report this morning, stating a 42% rise in net profit to £35.3 million. Dana has recently been in the spotlight as it has become a takeover target from Korean National Oil Corp. Shares in Dana were unchanged at 1806p.
Overnight, the bidding activity for data-storage specialist 3PAR heated up once again, after HP made a quick counter-offer to Dell's revised bid of $24.30 a share. HP is now offering $27 a share to 3PAR shareholders and attention turns to Dell on whether a further bid will be made.
In after-hours trading, shares in 3PAR rose to 6.8% to $27.80, which may be an indication that shareholders are expecting Dell to come back with a slightly higher offer.
In foreign exchange, the US Dollar gained against the Yen as Japanese Prime Minister Naoto Kan said that 'We are ready when necessary to take bold measures' in order to stop volatile movements in the Yen. [1] USD/JPY rose to ¥84.70 on the news.
The US Dollar was also stronger against the Euro and Sterling, ahead of Mr Bernanke's address later this afternoon and the release of the second-quarter US GDP figures. EUR/USD was trading at $1.2715, while GBP/USD was holding steady near $1.5500.
There is a degree of caution ahead of the Kansas City Federal Reserve meeting at Jackson Hole, where notable officials such as Ben Bernanke and ECB President Jean-Claude Trichet will be in attendance.
Bernanke is expected to make an opening address at the conference to give his view on the current economic situation. Investors are hoping that he will give more clues on whether the Fed will implement further policy measures to boost the struggling US economy.
However, some question how much more the Fed can do to boost the economy when interest rates are already near zero and the Fed's balance sheet is sitting at a record $2 trillion. Many feel it is now up to the government to impose some sort of fiscal management in order to remove the cloud of uncertainty over tax issues and restore confidence in business to start hiring again.
In addition, at 1.30pm (London time) US GDP for the second quarter will be announced, with economists expecting growth to be revised downward to 1.4% from 2.4%.
The Reuters/Michigan Consumer Sentiment Index for August will also be released at 2.55pm (London time). This index can move equities if the gauge deviates significantly from expectations, however economists are expecting the gauge to remain unchanged at 69.6.
Source: [1] Bloomberg news (27 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 27 August 2010: 06.30am Update
In overnight trade, concerns ahead of the Q2 GDP read and Ben Bernanke’s speech saw the major indices finish lower, erasing early gains that had come from a bigger than expected decline in the number of US jobless claims.
Also, comments from the Federal Reserve Bank of Kansas City that manufacturing growth had stalled across the region certainly didn’t help.
The Nasdaq was the worst performer for the session, down 1.1% while the S&P 500 and Dow Jones Industrial Average fell 0.8% and 0.7% respectively.
Across Asia, regional markets are all lower following weaker overseas leads, and ahead of the Q2 GDP read and Bernanke’s economic speech. The Shanghai Composite is the worst performer, down 0.3% while the Kospi, Hang Seng and Nikkei 225 are all softer by 0.1%.
The ASX 200 has moved into positive territory in early afternoon trade, currently 0.2% firmer at 4364. The move higher is a little bit surprising; one would usually expect selling pressure ahead of crucial economic data and following weak US leads.
Nonetheless, the consumer staples and discretionary stocks are adding most of the points, while the materials and energy sectors are still in red, although are well off their lows.
Turning to Europe, the week's final session is likely to be defined by the GDP releases due out of both the UK and US, plus Bernanke's speech from the Fed's summer meeting in Jackson Hole.
Any assessment of the economic outlook will potentially be grasped by traders. However, it would seem a big ask to try and convince what appears to be an increasingly sceptical market that the future is going to be all that bullish.
Earnings news from luxury retailer Tiffany, Spanish Airline Iberia and the UK's Rightmove will also provide some direction. Each of these offers an insight to a range of significant sectors, whilst takeover target Dana is also due to report.
The long weekend in London could leave the UK market looking somewhat lacklustre in the hours ahead and may increase the defensive mindset further.
Ahead of the open, we're calling the FTSE down 19 at 5137, the DAX down 35 at 5878 and the CAC down 24 at 3451.
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 27 Aug 2010" last update by AG, 27-Aug-2010
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