Spread Betting Market Drops Ahead of Slovakian EFSF Vote
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 11 October 2011: 11.00am Update
European shares slipped this morning as spread betting investors become cautious that a solution for the Eurozone debt crisis may be derailed by political deadlock in Slovakia, the final Eurozone country to approve the EFSF expansion.
By 10.30am (London time), the FTSE 100 was down 0.91% at 5349.60, whilst the FTSE 250 shed 0.59% to 10,080.73.
Bratislava takes centre stage
Yesterday, European Council president Herman Van Rompuy announced that a European summit initially scheduled to be held 17 October will now be postponed to 23 October.
This is because further details on the bank recapitalisation and the enhanced efficiency of stabilisation tools are needed. He said this while referring to the recent votes in Eurozone member countries to expand the European Financial Stability Facility (EFSF) bailout fund.
Slovakia is the last of the 17-member bloc yet to vote on a deal agreed by the region's leaders in July to boost the size and powers of the EFSF. Yesterday Malta became the 16th member state to agree, however all 17 Eurozone states must ratify the EFSF expansion for it to go active.
The vote has a lot of opposition in Slovakia, and there is a real risk that Slovakia would hold up or even block the whole EFSF deal. However, if they do vote against it, they can vote again, to get the ‘right’ result.
But Athens remains in the spotlight
In Athens, finance minister Evangelos Venizelos said Greece had wrapped up talks with European Union and International Monetary Fund officials and expected private bondholders to make a bigger contribution than originally envisaged in a second bailout deal agreed in July.
The EU, IMF and ECB mission chiefs, known as the Troika, are likely to conclude their visit with a joint statement today. They will then prepare reports for Eurozone finance ministers and the IMF board to decide on the aid tranche.
Mr Venizelos said Athens expected improvements in the €109 billion rescue package agreed by Eurozone leaders and hinted that banks will take heavier losses, calling it PSI (private sector involvement) Plus.
The chairman of Eurozone finance ministers, Jean-Claude Juncker, however refused to rule out a compulsory write-down of 50% to 60% of Greek debt, which is much higher than initial plans of a 21% write-down.
Economic data supports Bank of England
The UK manufacturing sector has been losing steam over the past few months as the global economy slowed and British companies and consumers held back in the face of renewed market turmoil and fears of a recession.
Economic data released this morning showed that manufacturing output grew at its slowest pace for 18 months in the year to August and fell by 0.3% on the month in August, versus a 0.1% rise the previous month.
The annual rate was down to 1.5% compared to a 2.6% rise the previous year. Industrial output rose 0.2% on the month, compared to forecasts for a 0.2% dip, helped by oil and gas which had output jump by 2.3% on the month.
The figures are likely to raise further concerns that the economy is slipping back towards recession, and validate the Bank of England's move to inject more stimulus into the economy to boost growth.
The British Chambers of Commerce (BCC) also welcomed the Bank of England's decision to expand its asset purchase programme by £75 billion last week to try to stimulate growth.
The BCC warned earlier this morning that the economy barely grew in the third quarter and risks were rising, calling on the government and the BoE to do more. A BCC survey suggested the economy grew by between 0.1% and 0.3% in the third quarter.
US pre-market
US December futures are pointing to a lower start this afternoon with Dow futures down 0.59%, and those for the S&P 500 are 0.65% lower. This evening we will see US economic optimism readings released at 3pm (London time) and the Fed’s minutes from their two-day policy meeting back in September at 7pm (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 11 October 2011: 6.00am Update
Overnight, US stocks ended sharply higher in reaction to the weekend discussions between France and Germany.
They pledged that they would shortly have a plan to recapitalise the European financial system and prevent further damaging fallout from the European debt crisis.
Among the major averages the Dow Jones Industrial Average jumped 3% to end at 11432, the S&P surged 3.4% to 1194, while the NASDAQ soared 3.5% to 2566. All S&P sectors finished higher led by advances in financial, materials and energy names.
This was the US markets’ first chance to react to the weekend discussions between German Chancellor, Angela Merkel and French President, Nicholas Sarkozy and their stated intention to have a comprehensive plan in place to address the Eurozone’s many issues by month’s end.
But is the market getting too far ahead of itself? There’s been so much meaningless talk out of Europe over the last 18 months that has amounted to nothing, yet here we are rallying 300-plus points on a ‘plan to come up with a plan’. The spread betting market probably needs to see the proverbial ‘proof in the pudding’ before it gets too carried away.
Asia and Australia
Across Asia, regional markets are all convincingly higher. The Hang Seng is the region’s best performer, up 3.4%, while the Kospi, Shanghai Composite and Nikkei 225 are all seeing more modest advances of between 1.8% and 2.1%.
In Australia, the ASX 200 is currently 0.4% firmer at 4219, down from its earlier session highs of 4245.
Gains for the market are once again relatively broad based with cyclical sectors continuing their resurgence having been sold down heavily over the course of August and September.
While the information technology and consumer discretionary sectors are seeing the biggest percentage gains, the heavyweight financial, materials and energy sectors are also enjoying solid advances of between 0.6% and 0.8%. The property trusts and consumer staples sectors are the only losers on the day.
Europe
Turning to Europe and the central focus will no doubt be on the upcoming Slovakian vote (expected around 11:00 GMT) on the ratification of the EFSF, with the market highly sceptical they will vote it through.
There's also limited economic data due for release today, although UK manufacturing data, the UK's NIESR GDP estimate and the FOMC meeting minutes may offer some direction.
In terms of earnings, US Q3 reporting season kicks off with Alcoa whilst in London, retailer Marks & Spencer can expect to find itself under scrutiny.
Ahead of the open we're calling the FTSE down 5 at 5394, the DAX up 3 at 5850 and the CAC down 1 at 3160.
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 Market Drops Ahead of Slovakian EFSF Vote" last update by AG, 11-Oct-2011
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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