Spread Betting Market Rally Continues as Greece Drops Bailout Referendum
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 4 November 2011: 11.00am Update
Spread betting markets advanced for a second successive day, after Athens abandoned plans to hold a referendum on the latest bailout package. Caution persisted however, ahead of the all-important US non-farm payrolls figures for October.
By 10.45am (London time), the FTSE 100 was up 0.9% at 5595.3, while the FTSE 250 had risen 0.29% to 10,436.86.
Greek PM clings on to power
Another day dawns, and George Papandreou is still the prime minister of Greece. After a day of move and counter-move in Athens, the current situation is that he still has to face a vote of no confidence in parliament on Friday.
Yesterday he told his cabinet that he was willing to form a government of national unity in order to provide a stable basis for the implementation of further austerity measures.
Meanwhile, in Cannes, where the G20 are still engaged in their summit meeting, Jose Manuel Barroso has said that it remains up to Greece to decide whether it wants to stay in the Eurozone, as global leaders discuss how to increase the financial firepower of the IMF.
It has become increasingly evident to non-European leaders that the Eurozone remains fundamentally incapable of crafting a coherent solution to its own crisis.
Therefore, the solution must come from the IMF, with member countries contributing more funds to the international body, giving it the ability to help larger countries such as Italy and Spain, if that becomes necessary.
Yesterday, new ECB chief Mario Draghi reiterated the bank’s stance that it can only have a limited role in the crisis, saying that it was up to national governments to press ahead with austerity measures.
RBS turns a profit
State-owned bank RBS made a pre-tax profit of just over £2 billion for the third quarter of 2011. This compares well with a loss of £1.156 billion for the same period last year, but the bank was forced to admit that it would fail to meet two key performance metrics due to regulatory changes and the weak state of the UK economy.
RBS would not meet its 2013 goal for increasing return on equity and on reducing its cost to income ratio. Nonetheless, the shares were up 5% at 23.94p (although that is a rise of just 1.2p), with the rest of the banking sector higher as well this morning.
Willie Walsh goes shopping
International Airlines (IAG), the parent company of flag carriers BA and Iberia, has announced that it has agreed to buy the airline British Midland from its Lufthansa owners. The price of the deal has not been revealed, but the acquisition is expected to be completed in the first quarter of next year.
IAG was able to lift revenues, but higher fuel costs took their toll, and as a result underlying pre-tax profit was down by just over a third. IAG said that the chief task for 2012 would be to offset the increasing costs of fuel while also coping with weaker demand. The shares descended 2.67% to 163.9p.
US pre-market
US futures have been quiet all morning, as traders anxiously await the latest set of non-farm payrolls figures. Futures for the Dow and S&P 500 are up 9 points and 1.3 points respectively.
The US economy is expected to have added 95,000 jobs in October, following on from September’s strong figures, while the unemployment rate is forecast to remain unchanged at 9.1%.
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 4 November 2011: 6.00am Update
Global markets extended their gains overnight, as Greece dropped voting on its financial rescue and the European Central Bank unexpectedly cut interest rates.
Spread betting markets cheered the news and gains were posted across the board. The ECB surprised the markets with a 25 basis point rate cut to 1.25% to bolster economies reeling from the debt crisis. New ECB President Mario Draghi made it clear that the euro area is at risk of relapsing into a mild recession.
Among the major averages, the Dow Jones Industrial Average surged 1.8% to end at 12,044. The S&P advanced 1.9% to close at 1261 and the Nasdaq climbed 2.2% to close at 2698. News that unemployment claims in the US dropped back below 400,000 went almost unnoticed as financial spread betting investors focused on news out of Europe.
Asia & Australia
Across Asia, regional markets are stronger after Greece dropped voting on its financial rescue and the European Central Bank unexpectedly cut interest rates. The news brought the cyclical stocks back into play, with resource names among the biggest gainers.
The Nikkei, which was closed for a bank holiday yesterday, is 1.3% higher with the exporters leading the charge. The Hang Seng is the best performer in the region with a 3.2% gain, while the Shanghai Composite is up half a percent.
The Aussie market has surged after picking up positive leads from overnight trading. Strong gains across most asset classes have translated into a solid day for the Australian index. It is currently trading 2.5% higher at 4277. The materials and energy sectors are leading the gains following a return to risk.
Commodity prices rallied overnight and have been particularly supportive of miners, with Fortescue Metals (+5.5%), Rio Tinto (+4.7%) and BHP Billiton (+3.7%) the biggest gainers. The big four banks are each over 2% higher, with Westpac (+3%) leading the way.
Mario Draghi has certainly come out with guns blazing in his first ECB conference, also highlighting that inflation pressures have abated and suggesting he ‘sees slow growth heading toward recession at year end’. We certainly expect to see another bout of volatility today, given the event risks.
Europe
Looking ahead at today’s European session, traders will be focusing on the confidence vote in Greece, and it is looking more and more likely that Greek Prime Minister George Papandreou may step down, with signs that the different parties are working towards the creation of a unity government. This could, in principle, take the reins on an interim basis if Friday's confidence vote fails
Arguably one of the biggest drivers of price action, which we all look forward to every month (to get a clearer sense of the US labour market), is the non-farm payrolls report due out today.
It could be argued that expectations have risen somewhat, given what we have seen from all the usual leading indicators, with the exception of consumer confidence (which is still very poor).
The four-week moving average for the initial claims has fallen, both the employment components of the services and manufacturing ISM reports have seen good expansion, and this week’s ADP private sector jobs report was strong, with 110,000 jobs created.
As it stands, the consensus is that we are set to see 95,000 jobs created (with the analyst’s views ranging from 50,000 to 150,000), while the private sector is expected to see 125,000 jobs created. A better-than-expected print should see risk on around all parts of the capital markets, with a decent sell-off in US Treasury yields.
Ahead of the European open we're calling the FTSE up 13 at 5559, the DAX up 25 at 6158 and the CAC up 11 at 3207.
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 Rally Continues as Greece Drops Bailout Referendum" last update by AG, 04-Nov-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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