Spread Betting 9 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 9 March 2010
The FTSE slipped into the red this morning after UK house prices grew at a slower pace than anticipated in February and credit ratings agency Moody's Investors Service issued a warning.
By 10.40am (London time), the FTSE 100 was trading 29.88 points (-0.53%) lower at 5576.84, while the broader FTSE 250 was 60.60 points (-0.62%) below its previous close at 9725.79.
House builders were knocked lower today after a report from the Royal Institute of Chartered Surveyors (RICS) showed a slowdown in UK house price gains in February. RICS explained that house price gains may continue to slow as the supply of available homes for sale increases.
'The magnitude of the gains going forward is likely to continue to ease, reflecting the fact that new supply coming into the market is starting to outstrip fresh demand,' said Jeremy Leaf, a spokesman for RICS.
Unsurprisingly then, Persimmon, Bellway, Bovis Homes, Taylor Wimpey and Barratt Developments lost between 0.8% and 2% this morning.
The banking sector was under pressure as well after ratings agency Moody’s said British banks may have their financial strength rating cut, as the UK government withdraws support.
'There may be some institutions that have not sufficiently improved the stand alone strength to offset the phasing out of extraordinary systemic support, and the senior debt and deposit ratings of these institutions could be downgraded,' Moody's said in a report published today. [1]
A bearish report on British banks by Credit Suisse also weighed on the sector this morning. Barclays, HSBC and Lloyds lost between 1% and 1.3%, while Royal Bank of Scotland and Standard Chartered retreated more than 2% to 38.62p and 1732p respectively.
The heavyweight mining sector also dragged on the blue-chip index, after Antofagasta unveiled a surprise 61% plunge in 2009 earnings. The Chilean copper miner blamed lower copper volumes and lower market prices for molybdenum as the cause for the drop in profits.
Antofagasta's shares sank 1.4% to 980p while Kazakhmys, BHP Billiton, Rio Tinto, Fresnillo and Lonmin fell more than 2% this morning.
Elsewhere, shares of Imperial Tobacco fell 2.8% to 2084p after UBS cut its rating from 'neutral' to 'sell' today. Meanwhile, its peer British American Tobacco lost 1.1% to 2297.5p.
On the domestic economic front, the Office for National Statistics showed the UK goods trade deficit unexpectedly widening to £7.987 billion in January following a 6.9% drop in exports. This was the widest deficit since August 2008.
The deficit for January was substantially worse than the £7 billion gap shown in a Reuters survey and follows a downwardly revised £7.01 billion deficit in December. Imports fell by a meagre 1.6%, meanwhile.
In Europe, Greek deficit fears receded, as Greek Prime Minister George Papandreou and other EU leaders collaborate on plans to avoid a Eurozone crisis.
The Greek Prime Minister, who is blaming speculators for much of the surge in Greek financing costs, said he will press US President Barack Obama to help with a European crackdown on 'unprincipled speculators'.
'If the European crisis metastasises, it could create a new global financial crisis with implications as grave as the US-originated crisis two years ago,' Papandreou warned. [2]
Meanwhile, French President Nicolas Sarkozy yesterday said the Euro region would rescue Greece should the government struggle to fund its budget deficit.
Furthermore, the European Commission stated it is studying the possibility of a European Monetary Fund that will help highly-indebted Eurozone members such as Greece.
Elsewhere, central bank leaders talking at the Bank for International Settlements (BIS) yesterday have agreed that the restocking of inventories and a revival in trade are aiding the global economic recovery and that improving financial markets mean certain stimulus policies can be withdrawn.
But ECB President Jean-Claude Trichet explained that the phasing out of non-standard measures should not be misconstrued as a signal for interest rate hikes.
'The market is improving, so that we can phase out the non-conventional measures without over-interpretation of this phasing out, and without this influencing the market sentiment, and without giving the signal that we are changing the monetary policy stance,' he said. [3]
Investors also digested comments by China's central bank governor Zhou Xiaochuan, who said the timing of China's exit from economic stimulus would require prudence.
His comments eased concerns over immediate monetary policy tightening; a development that's likely to continue fuelling gains across commodity and equity markets.
Source: [1] Bloomberg News (9 March 2010),
Source: [2] Bloomberg News (9 March 2010),
Source: [3] Reuters News (8 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 9 March 2010: 6am Update
In the US overnight, stocks fluctuated either side of the flat line on low volumes as the S&P 500 index struggled to maintain a seven-day winning streak.
Financial shares were pushed higher by news that AIG had sold one of its units for $15.5 billion.
The NASDAQ was the best performer, up 0.3% while the broad-based S&P 500 finished flat and the Dow Jones Industrial Average was weaker by 0.1%.
What was quite apparent was the clear lack of sector leadership with the S&P sectors providing no real leads for the FTSE today.
Telcos, Consumer services and Technology sectors outperformed while investors took profits in Industrial, Health Care and Material names.
Participants are concerned the market is a little overextended in the short term. There aren’t many people willing to make big bets either way at the moment.
With tonight marking the one-year anniversary of the bull market, it will be interesting to see how traders react from here.
In Asia, regional markets were mixed following a very quiet night of leads. As at 05.15, the Shanghai Composite and Hang Seng were the best performers, up 0.4% and 0.2% respectively. The Nikkei and Kospi were both weaker, down 0.1%.
In Australia the Australia 200 closed 0.2% stronger, with many sectors consolidating recent week gains. However, the materials sector, which has been the recent out-performer in Australia, closed down 0.5%.
Having traded to a morning low of 4791, the market got a shot of momentum following the release of the ANZ jobs ads and NAB business confidence data.
The 19.1% jump in monthly job ads, the biggest in more than a decade, certainly confirms the underlying strength in the labour market and strengthens the case for further gradual rate hikes over the year.
If that wasn’t enough, gains in business conditions and confidence suggests a pickup in future business investment may be imminent, easing the RBA’s concerns that this sector was lagging the rest of the economy.
With the focus of the market once again on Australia’s coal seam gas space, speculation is mounting whether the Arrow board will agree on the proposed joint bid from Royal Dutch Shell and PetroChina.
According to some analysts, the offer values Arrow’s proven and probable reserves at 88 Australian cents a gigajoule, which is below valuations of previous acquisitions in this space.
Judging by the reaction from most analysts, it’s likely we’ll see a revised bid and a more compelling offer; however the chance of a counter-bid seems slim.
We are seeing the FTSE 100 on 12.3 x current earnings, the cheapest in the G7 group. This has certainly caught the eye of international investors looking for relative value.
With the majority of companies coming out off ‘trough’ earnings and with around 23% projected earnings growth, the valuation of the index is attracting attention. However in the short term, given the leads from the US and judging by how Asian markets fared overnight we should see a pretty non-eventful open on European bourses.
In terms of economic data, the UK trade deficit is likely to prove of little consequence, unless there’s a significant shortfall on expectations, therefore ahead of the open we’re calling the FTSE down 2 at 5605, the DAX unchanged at 5876 and the CAC unchanged at 3904.
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 9 Mar 2010" last update by AG, 09-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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