Spread Betting 31 Oct 2008
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech - Research Analyst, IG Index.
Spread Betting 31 Oct 08
US equity markets opened in positive terrain this afternoon despite official government data revealing the US economy contracted at its sharpest pace in seven years during the third quarter.
Although Gross Domestic Product (GDP) fell by an annualised rate of 0.3% in the third quarter, the drop was not as pronounced as originally feared; consensus forecasts released by Bloomberg had revealed a majority of investors expecting GDP to drop at a 0.5% pace from the second quarter.
The fact that there wasn’t any unexpected bad news left investors feeling the US government is doing a good job at slowing the downturn, encouraging investors to re-enter equity markets in search of fundamentally 'cheap' companies.
The prospects of further rate cuts and the approval of financial services bail-out packages at a global level (let's not forget to mention the International Monetary Fund's efforts to tame emerging markets pressures) should help the global economy recover at a faster pace, right? How much more can equities fall? Let's just buy for the long-term – seems to be the rhetoric lurking at the back of investors’ minds at the moment.
Unsurprisingly, by around 3.15pm (London time) the Dow (Wall St) was up by 144 points (+1.6%) at 9135 and the broader S&P 500 had advanced 19.15 points (+2.06%) to 949.24.
Equities rose from across a range of sectors this afternoon: PC chip giant Intel Corp was up by around 4% at $15.53 a share after announcing that it will invest $11.7 million in a Taiwanese WiMax venture.
The heavyweight resource sector also helped lift US markets, with US aluminium firm Alcoa up by around 1% to $11.26, Newmont mining rising 1.7% to $26.34 and Vista Gold Corp up 7.5% at $1.29.
Also in the spotlight was Colgate-Palmolive, rising 6.03% to $63.58, after the firm reported a 19% rise in third-quarter profits to $499.9 million, from $420.1 million a year earlier. The world's largest maker of toothpaste said that bottom-line profit growth was helped by strong demand in Latin America and higher prices. Third-quarter sales were also healthy, up 13% to $4 billion, matching consensus estimates. Rival Procter and Gamble also rose, up 1.6% to $62.29.
Staples Inc was another star performer today, surging over 12% to $17.9, after third-quarter profits surpassed analyst estimates.
It was clearly a positive start for US equities this afternoon, but with crude oil back on the decline, I wonder if companies operating the sector will be able to retain their gains; this afternoon, December Brent crude was down by 2.6% at $63.74 a barrel, and December Light Sweet crude oil was 2.3% below its previous close at $65.95 a barrel.
Looking ahead to tomorrow's session, personal income and spending data will be released at 12.30 pm (London time), and the Chicago Purchasing Managers' Index will be released at 1.45pm (London time).
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 Oct 2008" written by AG, last updated 31-Oct-2008
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