Spread Betting Markets on Edge Ahead of German 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 29 September 2011: 11.00am Update
The FTSE 100 endured a choppy morning, but remained stuck in negative territory, as traders awaited the outcome of a vote in Berlin.
The mining sector was the main culprit, as China fears pushed shares of raw materials firms lower.
By 10.50am (London time), the FTSE 100 was down 0.59% at 5186.74, while the FTSE 250 had lost 0.67% to 9971.31. European markets were higher however, buoyed by optimism about the German vote.
Bundestag votes on EFSF
Spread betting markets remain on edge this morning as we await the outcome of the German Bundestag vote. All 17 Eurozone members need to pass the 21 July package, but the German government vote is the most keenly anticipated one.
At present, it is all but certain that Councillor Merkel will get an overall majority, but the key element is how many of her own governing coalition will vote against the measure. If 19 or more vote against, then her own government will begin to look shaky, which would have further deleterious consequences for attempts to craft a solution to the crisis.
Italy and Spain keep shorting bans in place
Italy and Spain have done their bit to worry markets by extending their short-selling bans into November. Both states renewed the bans on the shorting of financial stocks, which has been in place since August.
The ban has had a less than impressive effect on markets, with the Bloomberg index of European banks and financial services firms falling 10% since 12 August. Greece has said that it will examine its own shorting ban, while France said that it might lift its ban if conditions allowed (so that’s a ‘no’ then).
The ban was designed to prevent ‘evil speculators’ (one of the Eurozone’s favourite targets) from profiting from falls in banking shares, but the net effect has been to merely increase volatility and reduce liquidity in markets, making moves in the share prices of financial stocks more dramatic.
Banks up, but miners down on China fears
In London, the banking sector was in the ascendant this morning on hopes that the Bundestag will say ‘yes’ to the Eurozone vote. RBS was up 2% at 24.59p, while Barclays gained 1% to 168.15p.
However, the mining sector continued to fall, a reflection of concerns about the wider global economy. In part, this is due to a note from Bank of America, which said that risks in China’s financial markets could seriously impair growth in that economy, with growth coming in below 7%.
Copper prices were lower this morning, an indication of how cautious commodities spread betting investors remain about the global economy.
Thomas Cook cancels dividends
Thomas Cook rose 5.7% to 39p after the troubled tour operator announced that it was scrapping its dividend until the situation improved.
The firm, which traces its history back to the 1840s, said that trading in September had been even more difficult than in July and August, although it stopped short of issuing yet another profit warning. Ominously, the statement added that Thomas Cook was working with its bankers to improve financial flexibility.
The shares are down 79% for the year so far, but today’s rise reflects approval among investors that the company has decided to focus on shoring up its situation rather than continuing to pay the dividend, which, given the precipitous declines in the share price, represented a yield of 30%.
US pre-market
US futures are higher, pointing to some rebound for Wall Street following last night’s falls. S&P 500 futures are up 0.76%, while those for the Dow are up 0.65%.
US second-quarter GDP revisions are out at 1.30pm (London time), the same time as the publication of weekly jobless data, while pending home sales for August are at 3pm (London time) and the Kansas City Fed’s manufacturing activity emerges at 4pm (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 29 September 2011: 6.00am Update
All good things have to come to an end and unfortunately the S&P 500 could not make it four out of four successive gains.
US equities saw selling right up until the close, with the bears easily winning the session. The NASDAQ was the worst performer, losing 2.2% while the S&P fell 2.1% and the Dow Jones Industrial Average shed 1.6%.
Asia & Australia
Across Asia, regional markets are mixed to mostly lower following the negative set of offshore leads. Sentiment towards the latest plans in the Eurozone turned bearish while reports over the potential for a hard landing in China also spooked investor sentiment.
The Nikkei 225 and Shanghai Composite are the worst performers, both down 0.7%. The Kospi is 0.9% firmer while the Hang Seng is shut for business. In Australia, the ASX 200 is currently 1.3% weaker at 3985, with most sectors firmly in the red.
A sharp move lower overnight in risk assets is seeing our cyclical stocks under pressure with the materials, energy, consumer discretionary and industrial sectors detracting the bulk of the points. On the flipside, it’s the defensive healthcare, telecoms and consumer staples names that are outperforming on a relative basis.
Europe
In what is becoming an increasingly common theme, investor sentiment faltered once again yesterday over the outlook for successfully navigating the Eurozone debt crisis, leaving shares spread betting markets to slide on both sides of the Atlantic.
There's at least a firm data point due for release today, however, with the German vote on enlarging the EFSF. This has the potential to provide some meaningful support, on the assumption of course, that the resolution is passed.
Adding to trader woes however is resurgent talk that China's economic boom could find itself in line for a hard landing. So, against this backdrop it's far from surprising that markets are struggling to find positive themes right now.
In addition to the key Bundestag vote, we've also got German unemployment, US Q2 GDP and UK consumer credit data on the economic calendar, whilst there's also a scattering of earnings news around too.
Fashion retailer H&M, the London Stock Exchange, Compass Group and Thomas Cook will provide some of the highlights, although the macroeconomic considerations clearly remain far more significant.
Ahead of the open we're calling the FTSE down 29 at 5189, the DAX down 30 at 5548 and the CAC down 20 at 2976.
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 Markets on Edge Ahead of German EFSF Vote" last update by AG, 29-Sep-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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