Spread Betting 6 Nov 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 6 Nov 08
Britain's FTSE 100 index tracked the slide in US and Asian equity markets, falling as much as 199.56 points (-4.4%) to 4331.17 by 10.15am (London time) this morning, ahead of the Bank of England and European Central Bank’s interest-rate decision.
At the same time, the broader FTSE 250 had retreated 294.21 points (-4.35%) to 6463.25 and in Europe, Germany's Dax 30 had fallen 250.31 points (-4.84%) to 4916.56 while the French CAC had declined 161.83 points (-4.47%) to 3456.28.
With the US presidential election now over, the focus has shifted back to the dire economic reality, which continues to erode prospective corporate earnings and dent market sentiment.
This morning, the monthly survey conducted by the National Institute of Economic and Social Research (NIESR) revealed that Britain’s economy shrank 0.5% in the three months to October and that lower interest rates are unlikely to help bolster growth.
'The reduced availability of bank credit means that interest-rate reductions are unlikely to be as effective as they have been in the past and an early resumption of economic growth cannot be expected,' NIESR said. [1] The report follows another report released by the European Commission earlier this week, which forecast that the UK will contract by 1% in 2009.
HBOS's monthly house price survey added to this morning's pain: the survey revealed that Britain's average house price fell by a record 14.9% on the year in October, the most since the index began in 1983. The report also showed a monthly decline of 2.2% in October, which is the ninth consecutive monthly decline.
Banks and mining shares were not immune to faltering economic data either and this morning, banks resumed their downward trend, with Barclays and Standard Chartered both down by 4% to 188p and 979p respectively. HSBC and Lloyds were other casualties, with the former down 5.8% to 730p and the latter 5.58% lower at 197p.
Mining companies came under intense pressure as metal prices retreated and after Vedanta Resources posted a 24.7% drop in its first-half profits.
Among the worst performing miners were Vedanta Resources, which plunged almost 12% to 800p and Rio Tinto, which sank 10.82% to 2629p. BHP Billiton had 9.65% knocked off its value and Antofagasta was 9.16% lower than its previous close at 377p.
The energy sector was also hammered by waning crude oil prices, with BP, Cairn Energy and Tullow Oil among the worst performers, all down between 4% and 6%.
Meanwhile, recessionary pressures continued to dent the price of crude oil this morning, with December Brent crude down by 0.6% to $61.5 a barrel and December Light Sweet crude down 0.69% to $64.85 a barrel.
In the corporate arena, hedge fund Man Group tumbled 26% after it reported a 24% fall in pre-tax profits to £415 million in the six months to September. The hedge fund attributed the earnings decline to a drop in performance fees and amortisation charges.
Technology controls group Invensys was also among the FTSE 100's worst performers this morning, sagging 6.9% despite reporting a 12% rise in first-half operating profits and announcing that it had strengthened its financial standing.
In contrast, Old Mutual rose 4.3% to 55.9p despite reporting a 4% drop in nine-month sales.
Investors are now waiting for the Bank of England (BoE) and European Central Bank’s interest-rate verdicts. The BoE will release its interest-rate decision at noon (London time). Out of the 60 economists surveyed by Bloomberg, 46 have predicted a 50-basis-point cut, six expect a 75-basis-point cut, and eight have forecast a 100-basis-point reduction
The ECB will publish its rate decision at 12.45pm (London time). Bloomberg's median estimates point to 50-basis-point reduction to 3.25%.
Looking ahead to the US this afternoon, the pulse of the embattled US economy will be measured by the release of various economic data, including third-quarter non-farm productivity and jobless claims figures, which are scheduled for release at 1.30pm (London time).
Elsewhere, the downbeat sentiment seen in equity markets looks set to continue in the US this afternoon. Into the mid-morning session, December Dow futures were down by 155 points while December S&P futures were ticking 19.5 points lower, indicating that, as things stand, Wall Street is likely to open lower this afternoon.
[1] Source: Thomson Reuters (Nov 6 2008)
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 6 Nov 2008" written by AG, last updated 06-Nov-2008
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