Spread Betting 4 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 4 March 2010
The FTSE opened in negative territory this morning, after US equities retreated following a dovish Beige Book report.
Renewed concerns over China's economy, a drop in UK house prices and caution ahead of this afternoon's interest rate decision dented confidence as well this morning.
By around 10.30am (London time) the FTSE 100 was trading at 5524.98, down 8.08 points (-0.15%) from yesterday's close, while the broader FTSE 250 was 3.39 points (+0.04%) above its previous close at 9615.56.
March Dow and S&P 500 futures were also marginally lower, suggesting the market currently anticipates a negative open on Wall Street this afternoon.
Last night the Federal Reserve's latest Beige Book revealed that nine out of 12 Fed districts registered 'modest' growth between January and February, adding that consumer spending and manufacturing have continued to lead the recovery.
So far so good, but the thing that seemed a little bit concerning, at least in my opinion, was the fact that it highlighted the labour market and commercial real estate as problem areas.
According to the Beige Book, there is a serious chance that job losses exceeded job growth once again in February, while commercial real estate 'remained weak or declined further in most districts'. In addition, all Fed districts said construction was 'weak or slow, except for some moderate boost' from federal stimulus and public construction. [1]
Renewed concerns over the Chinese economy weighed on commodity prices, miners and the blue-chip index as well today.
According to Bloomberg News, China's Industrial Bank, which is partly-owned by a unit of HSBC, has predicted that growth in the bank’s new lending will drop by nearly 50% this year.
In addition, Stephen Roach, Chairman of Morgan Stanley in Asia, today said that the comments of China's Premier Wen Jiabao, who recently described China’s growth path as being 'unbalanced, uncoordinated, and unsustainable', were a 'serious concern'. [2]
Fresh house price data didn't bode well for morale either, with Halifax indicating that UK house prices declined 1.5% in February, the first drop in eight months. With high domestic unemployment and mortgage lending still very weak, it seems as though fundamentals have finally started to weigh on house prices.
'An increase in the number of properties available for sale has helped to reduce slightly the imbalance between supply and demand,' said Martin Ellis, an economist at Halifax.
'The bad weather in the first two months of 2010' and the tax change 'are likely to have had an adverse impact on housing demand.' [3]
Investors may have also been playing it safe ahead of today's interest rate decision by the Bank of England and European Central Bank.
The monetary policy decisions are due at noon (London time) and 12.45pm, respectively. The BoE and ECB are widely expected to keep interest rates unchanged today. The BoE is also expected to maintain the size of its quantitative easing (QE) programme.
On the corporate front, Aviva saw its shares decline 2.3% to 381.1p after its full-year results missed consensus estimates. Britain's second-biggest insurer swung a full-year profit of £1.09 billion following a £915 million loss in 2008. The insurer also slashed its final dividend by 27% to 24p a share.
Admiral Group fell 2.7% to 1209p this morning after Citigroup cut its rating from 'buy' to 'hold' while Morgan Stanley lowered its recommendation on the insurer from 'overweight' to 'equal weight'. Bank of America moved its recommendation on the company from 'buy' to 'neutral' on Wednesday. [4]
Elsewhere, oil services group Amec plunged 6.6% to 766.5p after issuing a 'challenging' outlook while peer Petrofac declined 0.6% to 1089p after Evolution cut its rating from 'buy' to 'neutral'. [5]
Looking ahead to the US, investors note that the jobless claims and Non-farm productivity figures are scheduled for release at 1.30pm (London time) followed by factory orders and pending home sales at 3pm.
Source: [1] Bloomberg News (4 March 2010),
Source: [2] Bloomberg News (4 March 2010),
Source: [3] Bloomberg News (4 March 2010),
Source: [4] Financial Times (4 March 2010),
Source: [5] Reuters News (4 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 4 March 2010: 6am Update
Overnight, US stocks retreated from earlier gains after the Fed Reserve reported weak commercial real estate and loan demand, and the Fed’s Beige Book showed evidence of muted economic growth.
Elsewhere the ADP reported that the private sector shed 20,000 jobs, in line with market expectations. President Obama also delivered a persuasive speech to Congress urging them to vote in favour of the latest healthcare reforms, as well as mentioning his proposed changes for large financials.
Both the NASDAQ and S&P 500 finished the session flat, while the Dow Jones Industrial Average fell 0.1%.
Across Asia, at 05:30, regional indices are all weaker after inconclusive direction from Wall Street, with higher metal prices and positive reads on the US service sector being offset by Washington rhetoric about reforms to the healthcare and financial sectors.
The Shanghai Composite and the Nikkei 225 are leading the declines to be lower by 1% and 0.9% respectively, while the Hang Seng and the Kospi are seeing more muted losses, dropping by 0.5% and 0.3%.
In Australia, the ASX 200 oscillated in and out of positive territory with the benchmark index closing firmer by 0.3% at 4750, right on its highs of the session.
Not surprisingly, sector leadership came from the materials space which once again benefited from further gains in base metal prices and the broader commodity complex.
The consumer staples sector also performed well, while points were taken out of the index by the energy and industrial names.
Turning to Europe, yesterday’s late sell-off in the US may be the key driver for European equities at the open but after another solid day of gains, a degree of profit taking can hardly be seen as surprising.
The FTSE yesterday moved back above the 5,500 level for the first time in over 6 weeks and traders in London are once again eyeing fresh year-to-date highs of around 5,600.
With miners set to remain in favour after base metals prices rallied again in Asian trade, this certainly has the scope to slow any reversion in London given the index’s heavy weighting of mining stocks. However, it is worth noting there are also a number of key fundamentals that need to be considered as the day progresses.
Both the Bank of England and ECB are to announce their latest monetary policy plans later in the session.
Neither has had an easy ride of late, with the downward revision of Q3 GDP in the UK increasing concern over a double-dip recession, while Eurozone fringe countries remain fragile even if the situation in Greece does continue to gradually improve.
In addition, the revised Q4 Eurozone GDP reading is also due.
There is also high-profile earnings news due in the coming hours with Aviva, Kazakhmys and Whitbread among the higher profile names in London.
Expectations are that this will be unchanged at 0.1%, but this gives little scope for change before tipping negative once again.
Ahead of the open, we’re calling the FTSE down 29 at 5504, the Dax 30 down 40 at 5578 and the CAC down 27 at 3816.
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 4 Mar 2010" last update by AG, 04-Mar-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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