Spread Betting Investor Optimism Boosts UK Mining Sector
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 3 January 2011: 11.00am Update
A slew of stronger economic figures from the vital economies of India, China and Germany put investors in an upbeat mood for the first day of London trading in 2012.
Only a deepening row between the US and Iran threatens to disrupt the positive atmosphere at present.
By 10.45am (London time), the FTSE 100 was up 0.83% to 5618.88, and the FTSE 250 had risen 0.64% to 10,167.72.
Positive economic data lifts markets
For indices spread betting markets, 2012 has got off to a flying start, as the UK trudges back to work following the Christmas and New Year quiet period.
The FTSE 100 has risen over 1%, helped by strong performances by mining stocks, emulating a good day for European markets yesterday, which began 2012 firmly on the front foot despite a round of still-weak economic data.
Investors seem to be in a generally positive frame of mind, as they put the travails of 2011 behind them and look forward to the year ahead.
They have been aided by manufacturing data from the Asian titans of India and China, whose PMIs registered expansion for the final month of 2011, up from 51 to 54.2, and to 56 from 49.7 respectively.
Signs of continued growth in these two vital props of the global economy are a welcome distraction for investors from the travails in Europe.
The return to growth for India calms worries that the nation's central bank will ease its tight monetary policy, while the switch from contraction to expansion for the Chinese dragon puts the old China growth story back on the front page.
In Europe, German unemployment data also provided positive figures. Jobless numbers fell to their lowest level in December since reunification, with the rate down to 6.8% from 6.9% a month earlier.
Germany is the equivalent of China where Europe is concerned, with the performance of the Teutonic economy keenly watched by all markets.
Everyone is aware that the Eurozone will live or die by Germany's actions, and that the economic health of all Europe is predicated on Germany.
Miners lead the index higher
Optimism among investors has been reflected in the mining sector, which saw impressive gains for most major names.
Rio Tinto led the way, up 5.2% to £32.89, followed by Xstrata, Kazakhmys, Antofagasta and Anglo America, all around 4% higher.
Essar Energy, the Indian firm which had such a disastrous 2011, when the shares dropped 70%, is up this morning, rising 4.5% to 179p.
Bank shares saw more modest gains, but were still firmly higher. Barclays gained the most, up 2.3% to 180p, while the other 'big four' enjoyed rises of over 1%.
Oil up on US-Iran spat
One bleak spot on the horizon is the Persian Gulf, where the US and Iran continue to trade warnings over the Straits of Hormuz.
Iran has been testing new missiles and tactics of late, as it practises the manoeuvres required to shut the straits to traffic. Tehran's foreign minister put everyone in a spin in December when he threatened to close the straits, but it should be noted that such a closure would cut off Iran's access to oil markets, denying it vital revenue.
Iran's navy has been at pains to say that it is not in the nation's interest to close the waterway, but the damage has been done. Today Tehran warned that the US aircraft carrier in the region, believed to be the USS John C. Stennis, should stay away from the waterway to avoid inflaming tensions any further.
We can expect the US to issue some sort of rebuttal to this soon, perhaps even sending the carrier and its battle group back into the straits as a demonstration of force.
Crude oil futures are up 2% this morning as a result of the news, with US crude at $100.96 per barrel and Brent crude at $109.79.
Looking ahead
US futures do not restart trading until 11am (London time), so at the time of writing it is not possible to give an estimate of how Wall Street will start the day.
However, I suspect it will mimic London and the overnight markets in Asia, and start the day in an upbeat frame of mind.
The US joins the manufacturing reporting theme with the ISM index for December at 3pm, with the minutes of the Fed's December meeting following on at 7pm (both London time).
Remember that financial spread betting is a leveraged product and can result in losses that exceed your initial deposit. Spread betting may not be suitable for everyone, so please ensure that you fully understand the risks involved.
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 03 January 2012: 4.30am Update
Across Asia, regional markets are all higher to kick start the New Year after a dismal 2011. The Kospi is the region’s best performer, up 2%, while the Hang Seng is seeing a gain of 1.8%. The Nikkei 225 remains closed.
Asia & Australia
European markets provided the inspiration for a positive Asian session, of those that were open, which also had the luxury of pricing in Chinese manufacturing expansion in December.
With US futures not resuming trade until after the open of the European markets perhaps some of the impetus has been lost in a continuation of the poor liquidity environment. Many Sydney-based broking firms will be keeping a firm eye on the cricket.
One has the sense that given all the doom and gloom coming out of all areas of the capital markets that perhaps ‘unchanged’ for the year for the S&P 500 is actually a minor positive.
Statistics show that since 1947 when we had a year that the S&P closed with a move in the range of +/-3% that the following year would gain 12.3% on average.
It’s a question of what is going to cause a change in asset allocation. With downside risks to global growth and subsequent poor corporate earnings visibility, we can’t see asset managers reversing their ‘capital preservation’ trade anytime soon.
In Australia, the ASX 200 is currently 1.2% stronger at 4105, just off its session high of 4107.
While it’s certainly nice to see the market 1% higher to start the new trading year, you get the sense that the market is really just going through the motions.
To use some sporting parlance, we are essentially in ’junk time‘. It will not really be until mid January at the earliest, as market players and money managers return from their festive season holidays, that we will be able to garner a real assessment of the market’s mood for early 2012.
We also need to put today’s gains into context. We finished 2011 with three straight days of falls, and plenty of pessimism, so it was not going to take much to see a bit of buying interest come back into the market.
Europe
This week we should see fundamentals play a big part with a string of key data releases in the US, culminating in Friday’s payrolls report. France and Germany will both tap the market in bill and bond auctions ahead of what will be a busy time in the fixed income market.
Speculation that Germany is trying to engineer a larger haircut to be worn by Greek debt holders won’t do anything to help matters.
It also has to be said that Spain and Italy won’t be looking for funding until next week ahead of the French and German bilateral summit. This will be the first of many meetings to conclude negotiations on closer economic integration.
UK manufacturing is likely to show a continued contraction, with the FTSE playing ‘catch up’ to its European counterparts; manufacturing is not a huge part of the economy, however with fears of recession looming, any upside will be warmly welcomed.
Ahead of the open we are calling the FTSE spread betting market up 90 at 6057, whilst our opening calls on DAX and CAC start at 07:00 (GMT).
Remember that financial spread betting is a leveraged product and can result in losses that exceed your initial deposit. Spread betting may not be suitable for everyone, so please ensure that you fully understand the risks involved.
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.
Advert:
IG Index Spread Betting - No Fees, No Commissions, Free Charts and Live Prices.
Spread Bet on Indices, Forex, Commodities, Shares and more. For details see IG Index.
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"Spread Betting Investor Optimism Boosts UK Mining Sector" last update by AG, 03-Jan-2012
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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