Spread Betting 2 Mar 2010
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For today's update see Spread Betting.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 2 March 2010
Overnight gains on Wall Street and a strong showing across most Asian equity markets helped the FTSE build on yesterday's rally this morning.
Although the FTSE 100 traded in positive territory throughout this morning's session, there were a few choppy bouts, with occasional losses across the heavyweight mining sector between 9am and 9.30am weighing on the blue-chip index. Perhaps weaker metal prices encouraged investors to lock-in profits across miners.
May high-grade copper futures drifted 1% lower at $3.3125 per pound this morning, having jumped 6.18% to $3.487 per pound yesterday. In addition, April gold futures eased 0.13% to $1116.9 per troy ounce.
Underlying choppiness in equity markets normally reflects uncertainty, and the foundations of the recent bullish trend aren't looking as resilient. Adding insult to injury, economic fundamentals in the UK seem to be losing momentum.
Today, a report from the Chartered Institute of Purchasing and Supply revealed that the UK construction sector unexpectedly contracted at a faster pace than anticipated.
The Purchasing Managers' Index for the UK construction sector fell to a reading of 48.5 in February from 48.6 the prior month, confounding analysts who were anticipating a rise to 48.9.
'The recovery of the wider UK economy is yet to filter through to the construction sector, with February PMI data showing a sustained decline in activity levels over a two-year period,' said Sarah Ledger, an economist at Markit. 'Poor weather conditions also had a detrimental effect on the sector.'
'Construction companies remained optimistic over future activity for the next twelve months. Nonetheless, potential cuts in public spending could negatively impact sector performance, suggesting that fragility will be a key theme over the coming months,' she added. [1]
Domestic earnings news has been somewhat mixed today, with engineer and ceramics group Cookson retreating 4.4% to 447.4p after unveiling a 57% slump in full-year headline pre-tax profit and engineering specialist Keller down 3.6% to 650.5p after showing a 34% slump in 2009 profit.
Cookson said it expects its performance to 'recover significantly' in 2010 while Keller said it is yet to see any sustainable upturn in orders.
Oilfields services provider John Wood Group was also weaker, down 0.6% to 361.7p after announcing that its full-year profit declined to $164.2 million on project delays and a weaker oil and gas engineering market.
Separately, financial services group Provident Financial saw its shares slide 5.35% to 920p this morning, after missing profit targets and unveiling a 9.8% rise in impairments of £216.7 million.
Bucking the trend was house builder Persimmon, which climbed 3.2% to 413.4p after reporting a profit after tax of £74.1 million for 2009 compared with a loss a year earlier.
ARM Holdings was also among this morning's best performers, up 2.4% to 214.1p following an upbeat trading outlook from US peer SanDisk and a bullish sector report from UBS.
By 10.30am, the FTSE 100 was trading 11.83 points (+0.22%) above its previous close at 5417.77, while the broader FTSE 250 was 19.93 points (-0.21%) lower at 9459.90.
Meanwhile, March Dow and S&P 500 futures traded marginally lower, suggesting as the situation stands that Wall Street may open lower this afternoon.
Source: [1] Reuters News (2 March 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 2 March 2010: 6am Update
Overnight leads were positive for Asian markets with both the FTSE and S&P closing up 1% a piece.
Focussing on the US, it was a strong night's trade with all S&P 500 sectors ending firmer, with the broader market closing just off its high at 1115.
The news that Prudential is looking to acquire AIG's Asian arm for around $35 billion was negative for Sterling. It was ultimately bullish for equities however, especially when Sovereign wealth funds are expected to back the deal, giving it their stamp of approval.
Whilst political rhetoric will always be the main driver of markets, traders will also be looking for M&A activity throughout 2010 as an indication of confidence in future earnings growth of a company or sector.
Markets are also partially factoring in a potential bailout of Greece, although there's yet to be any concrete news and it was not reflected by forex traders overnight as the Euro fell against the greenback.
Last week was characterised by some disappointing economic data that missed economists' expectations. The new trading week got off to a more positive start with the release of the latest Personal Income and Expenditure data, which revealed personal spending gained 0.5%, despite incomes rising just 0.1%. Economists had been expecting both measures to increase by 0.4%.
At 05.30 UK time, regional markets are mixed after solid US leads and better-than-expected US consumer spending data. The Korean Kospi is the best performer, up 1.5% while the Nikkei is up 0.4%. The Hang Seng however is bucking this trend, down 0.8%.
In Australia, the ASX 200 closed up 15 points at 4701, having reached earlier highs of 4716. Despite stronger-than-expected retail sales data, the broader market drifted off morning highs as the Australian interest-rate decision approached.
As was widely tipped, the RBA chose to hike rates by 25 basis points to 4%, resulting in a relatively muted reaction from the market. Equities gave some ground, while the Aussie Dollar is virtually unchanged, having spiked to a high of 0.9033 immediately after the announcement.
While the timing of the hike was always subject to conjecture, the RBA explicitly said rates were going higher as the economic recovery continued. While Australia is a relatively small player in the global scheme of things, the world was looking at the rate decision today.
With the RBA holding rates in February to see how developments progressed with regards to European sovereign debt issues, another month of pausing rates would no doubt have been taken negatively.
Ultimately, the decision to hike should be seen as a vote of confidence in the underlying strength of the Australian economy. The board noted that growth is close to trend, and that inflation is tracking near to target, so it makes complete sense to move rates up to more neutral levels.
Reflecting on the UK yesterday, worse-than-expected numbers from HSBC served as a stark reminder that bad debts continue to linger, and Prudential took a beating after suggestions that they could be paying top of the market prices for AIA.
With Sterling under pressure too, nervous investors could be unwilling to take on much more in the way of GBP-denominated assets. It's worth noting that the prospect of a debt downgrade on the back of the massive purchase could hamper Prudential further too.
In politics, a potential hung parliament is leading to some speculation that an election could be called as soon as today, which would ensure it's all over before the final Q4 GDP revision or discussion of any kind of budget for 2010/11.
There's not much on the UK economic calendar today but Eurozone CPI will be worth watching, while there's also a flurry of earnings news including Admiral, Fresnillo, Provident Financial and Persimmon Homes.
It's hard to be inspired by the upcoming market open and as a result we're calling the FTSE to start up 3 points at 5409, the DAX up 2 points at 5716 and the CAC down 5 points at 3765.
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 2 Mar 2010" last update by AG, 02-Mar-2010
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