Spread Betting 31 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 31 August 2010: 11.30am Update
Weak leads from US and Asian equity markets saw the FTSE open in the red, as investors fretted over a stalling global economy, despite a lift in UK consumer confidence and an increase in consumer lending.
Concerns over the health of the US economy saw Wall Street close lower overnight, paring last Friday's gains off the back of Fed Chairman Ben Bernanke's comments that the Fed was prepared to take the necessary steps to support the struggling US economy.
Asian equity markets also finished in the red, lead by a 3.6% drop in the Japanese Nikkei. Japanese investors dismissed the government's attempt to stem the Yen's rise and support Japanese companies through the expansion of its bank-loan programme, on the view that the additional $118 billion to the program won't be enough to weaken the Yen.
The negative sentiment has spilled over into the UK spread betting markets this morning, with financials and resource stocks dragging the FTSE lower, despite some improvements seen in the UK consumer space.
The Bank of England reported that lending to individuals increased by £0.3 billion in July, led by a larger-than-expected increase in net consumer credit. Mortgage approvals also unexpectedly rose to 48,700 in July from an upwardly revised 48,600 the prior month. The median estimate from economists surveyed by Bloomberg pointed to mortgage approvals falling to 46,500.
The pick-up in consumer lending follows an improvement in consumer confidence in August, according to a survey conducted by GfK. The consumer confidence gauge unexpectedly rose to a reading of -18 in August, ahead of expectations for a decrease in confidence to -24.
The improvement is an encouraging sign for the UK economy and suggests that consumers are reacting to the rebound in GDP growth. However, the fact that this gauge is still negative shows confidence remains weak overall and may stay that way as the UK budget cuts start to affect the economy.
The latest gauge on US consumer confidence will be released this afternoon at 3pm (London time).
By 11am (London time) the FTSE 100 was 48.10 points lower (-0.93%) at 5153.46, while the broader FTSE 250 declined 53.05 points (-0.55%) to 9726.85.
Bunzl was one of the few gainers on the FTSE 100 this morning, after the vending machine supplier saw first-half revenue rise to £2.35 billion. Shares in Bunzl were up 2.42% to 719p.
Banks were broadly lower this morning, lead by a 2.62% decline in Barclays, while Lloyds and Standard Chartered both lost 1.7%.
In Europe, Germany saw the number of unemployed drop by 17,000, the 14th straight month of declines. However, the headline unemployment rate remained unchanged at 7.6%.
Meanwhile, French retailer Carrefour returned to profit in the first-half, reporting net profit of €82 million. This helped the Euro see modest gains against the US Dollar, rising 0.15% to $1.2682.
Sterling was weaker against the US Dollar at $1.5425 as investors shunned riskier assets. The Yen spread betting market was stronger against the US Dollar as investors doubt the Japanese government's ability to intervene in a meaningful way to weaken their currency. USD/JPY is hovering at 15 year lows at ¥84.40 yen.
This afternoon the S&P/Case-Shiller house price index will be released at 2pm (London time), with the market expecting year-on-year prices to decline to 3.5% in June from 4.61%.
Details of the Chicago Purchasing Managers' index for August will be made available at 2.45pm (London time) with economists forecasting the gauge to fall to 57 from 62.3 the previous month.
Finally at 3pm (London time), investors will be looking for US consumer confidence to increase from 50.4 to 50.7, according to the median estimate from economists surveyed by Bloomberg.
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 31 August 2010: 06.30am Update
On Wall St overnight, US markets gave up most of the points gained during Friday’s session as stronger-than-expected consumer spending data did little to overshadow a weaker-than-expected rise in personal incomes, with the first drop in disposable income since January.
The slower personal income growth saw participants focus on the prospects of a double-dip recession.
For the session, the technology-laden Nasdaq was the worst performer, down 1.6% while the S&P 500 fell 1.5% and the Dow Jones Industrial Average finished the day 1.4% in the red.
Across Asia, regional markets are all lower this Tuesday following the weak US leads. Disappointing personal income data in the US ignited further fears over the potential for the double-dip recession.
As of 06:15, the Nikkei 225 is the worst performer, down 2.8% while the Shanghai Composite, Kospi and Hang Seng are all lower between 0.5% and 1.1%.
In Australia, the ASX 200 is 0.8% weaker at 4418.5 having traded as low as 4412. Despite a brief rally following the better-than-expected building approvals and retails sales data, falls have largely been broad-based.
The heavily weighted financials, materials and energy names are doing most of the damage as investors shy away from cyclical stocks, instead choosing to bid up more defensive sectors like healthcare and telecommunications.
Looking ahead to Europe, selling was the order of the day during Monday's trade for equities and has been sustained during the Asian session. As London-based dealers return to their desks after the long weekend the pressure is going to be heaped on the downside for the FTSE.
Some optimism may be forthcoming in the better-than-expected UK consumer confidence data that was released overnight but there's going to be a need to play catch up combined with the idea that any rampant growth we're seeing now is merely going to end up being the peak between two recessionary troughs.
As the day progresses, US consumer confidence will be very much in focus amidst what has been rather lacklustre economic data from Washington. On the earnings calendar, retail giant Carrefour is due to report in Paris shortly.
It almost goes without saying that as the week progresses Friday's Non Farm payrolls out of the US will take on added significance.
So, as the UK and other northern hemisphere markets emerge from the summer break, we're calling the FTSE down 35 at 5167, the DAX down 52 at 5860 and the CAC down 34 at 3453.
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 31 Aug 2010" last update by AG, 31-Aug-2010
Warning: Financial spread betting carries a high level of risk. You can lose more than your initial investment or stake. Financial spread betting may not be suitable for all investors. Only trade with money that you can afford to lose. Make sure you fully understand the risk involved. If necessary, seek independent financial advice.
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