Spread Betting 5 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 5 March 2010
The FTSE climbed to an 18-month high this morning ahead of this afternoon’s US non-farm payroll figures.
Sentiment at the moment may be best described as being cautiously optimistic, with a bigger-than-expected drop in last night’s US jobless claims figures and overnight gains on Wall Street and Asian bourses instigating gains on the domestic equity market.
Adding to positive morale was British retail bellwether John Lewis, which posted another double-digit rise in weekly sales. The employee-owned group today said that sales at its 28 department stores climbed 14.8% (year-on-year basis) in the week to February 27.
That was the seventh straight double-digit percentage increase and suggests that domestic retail sales are rebounding.
As a matter of fact, the Confederation of British Industry last week said that UK retail sales volumes rose at their fastest pace in nearly three years in February.
Unsurprisingly, retail companies have benefited from today’s upbeat retail sales figures, with Marks & Spencer and Next both advancing over 1% to 344.1p and 1905p respectively.
Meanwhile, electronics retailer DSG International climbed 0.9% to 32.18p and mobile phone retailer Carphone Warehouse rose 0.7% to 189.5p.
Broker upgrades also contributed to the positive start, with sugar giant Tate & Lyle up 1.5% to 448.26 after Credit Suisse upgraded its rating on the company from ‘neutral’ to ‘outperform.’
Fund manager Schroders rose 4.6% to 1370p after brokers Singer Capital and S&P Equity Research raised their price target on the company by 10% to 1375p and 1426p respectively.
Earnings news was also upbeat, with United Business Media (UBM) among the outperformers, up 7.2% to 496.7p after unveiling 2009 operating profits of £171.2 million, beating the predictions of JPMorgan Chase and Citigroup.
Shares of Michael Page were unchanged at 385.4p, however, despite unveiling an 85% slump in full-year profits. The company’s outlook was reassuring though, saying markets are starting to recover and that it expects an improvement this year.
Advertising group WPP bucked the positive trend, falling 0.6% to 620p after recessionary strains battered the company’s full-year revenues a little more than anticipated.
On an encouraging note, the company said it believes that the worst of the advertising recession was over, adding that it expects revenues growth to pickup during this year.
WPP unveiled a second interim dividend of 10.28p a share, bringing the total annual dividend to 15.47p – that’s a historic dividend yield of 2.49%.
By 10:40am (London time), the FTSE 100 was trading 23.61 points (+0.43%) higher at 5550.77, while the broader FTSE 250 was 57.6 points (+0.60%) above its previous close at 9722.89.
In addition, March Dow and S&P 500 futures were around 0.20% higher, suggesting the market currently expects Wall Street to open higher this afternoon.
Of course this could change if investors start fretting over this afternoon’s US Non-farm payrolls or unemployment rate - so watch out for their release at 1:30pm (London time).
According to Bloomberg’s median forecasts, the labour market report may show the American economy shedding 65,000 jobs in February and the unemployment rate rising to 9.8% from 9.7% the prior month.
As always it is imperative that you take into consideration the prior months payroll revisions as well.
I would also like to point out that China’s Premier Wen Jiabao made the headlines today. He is predicting that China’s growth rate will be around 8% this year but warned that the number of new investment projects will slow and that the Chinese banking sector contained ‘latent risks’.
Mr Wen Jiabao has said the Chinese government would maintain a ‘proactive’ fiscal policy and ‘moderately easy’ monetary policy since he’s still cautious of the country’s underlying fundamentals.
According to the FT, Mr Wen has said that China “must not interpret the economic turnaround as a fundamental improvement in the economic situation. There is insufficient internal impetus driving economic growth.’ [1]
Source: [1] Financial Times (5 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 5 March 2010: 6am Update
In equity market action overnight, both European and US stocks rose after American jobless claims fell from a three-month high, and worker productivity levels came in above market expectations.
A number of broker upgrades to the likes of Walt Disney, Coca Cola and Boeing also helped US indices rally into the close.
The technology heavy NASDAQ and Dow Jones Industrial Average were the best performers, both up 0.5%, while the S&P 500 rose 0.4%.
In Asia, equity markets are all higher after US jobless claims dropped, Greek sovereign debt concerns eased, and speculation grew that the Bank of Japan will take further action to ease credit.
The Nikkei is the top performer, up 2.2% while the Hang Seng, Kospi and Shanghai Composite are stronger between 0.2% and 0.9%.
In Australia, the ASX 200 closed 0.3% firmer at 4767, slightly off session highs of 4780. It was very positive to see broad-based gains, especially ahead of such a crucial economic release with the February non-farms payroll report.
Whilst the defensive natured healthcare sector was the best percentage gainer, the bulk of the points came from the industrials, materials and energy spaces.
Given it's a Friday and ahead of non-farm payrolls in the US, it was not surprising to see a little bit of investor caution heading. While the release is normally a highly anticipated event, it is expected to be distorted by recent snow storms on the US East coast.
Turning to Europe, there may have been a degree of uncertainty in European markets yesterday. However, the FTSE held above that key 5,500 level, and the fact that Wall Street rallied hard in the latter part of the session is setting an upbeat tone for Friday's open.
US retail sales showed resilience in February despite the bad weather. This is lifting the outlook over those key non-farm payroll figures that we'll see later in the European session and as always this has the potential to define just how equity markets either side of the Atlantic trade into the weekend break.
A weak number is likely to be shrugged off by markets, while anything close to jobs creation could signal a wave of fresh optimism.
On a technical basis, a number of analysts are talking about the inverted head and shoulders reversal pattern on the S&P 500 index. This looks positive indeed and points towards further upside momentum in coming weeks.
The UK PPI data will also be closely watched as concerns over the potential for runaway inflation remain front of mind. However, there's also a rather important meeting scheduled to take place between the Greek PM and German Chancellor.
So far the Greek issue is holding clear of that contagion risk, but failure to agree definitively upon the next steps today could send real concerns through any European bank sitting on Greek sovereign debt.
London also has a couple of notable earnings announcements in the form of WPP and Michael Page, both of which are highly sensitive to the economic cycle.
Bullish readings here could add further upside, although both have a degree of focus on international markets as opposed to just the UK. Ahead of the open, we're calling the FTSE up 13 at 5540, the DAX up 20 at 5815 and the CAC up 13 at 3841.
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 5 Mar 2010" last update by AG, 05-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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