Tesco Shares Rise as Supermarket Giant Pulls Out of Japan
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 31 August 2011: 10.30am Update
There were yet more gains for the FTSE 100 this morning, as the latest set of Fed minutes continued to bolster the argument that the Federal Reserve will opt for more quantitative easing.
By 10.30am (London time), the FTSE 100 had risen 1.08% to 5325.58, while the FTSE 250 was 1.52% higher at 10938.26. Markets in Spain, France, Italy and Germany also enjoyed advances of around 1.5%.
Fed minutes boost markets
Ben Bernanke’s speech on Friday may have been fairly Delphic, but it was enough to provoke three days of gains for global markets.
Last night’s Fed minutes, for the 9 August meeting, showed that the Fed’s policymakers came very close to instituting a further round of quantitative easing. Some members of the Fed argued for further action by the US central bank, but dissent from three members meant that in the end the committee opted for guidance on keeping rates low for an even more extended period.
Last night, Minneapolis Fed president Kocherlakota, who had been one of the three hawks, appeared to edge back from his position, saying that more easing may be necessary if deflation, or the possibility of it, reappeared.
This reduction in the hawkish cadre on the Fed board has emboldened financial spread betting markets to expect that more QE is on its way in September.
Charles Evans, one of the perennial doves of the committee, said yesterday that more should be done to ‘increase the level of accommodation’. Although he qualified this by saying that an explicit commitment to keep rates low unless inflation moved above 3% would be an effective tool, but his words have been sufficient to fire up expectations of more asset purchases.
Core CPI may be running at 1.8%, but it is worth pointing out that the ‘Billion Price Project’ which tracks prices of a billion products in real time, shows that annual inflation is now at a year high of almost 4%.
Tesco abandons the Land of the Rising Sun
Supermarket giant Tesco has announced it will be withdrawing from Japan after the company decided that it would be unable to achieve critical mass.
Tesco employed 4000 people in the country, but the division had the weakest like-for-like growth in the latest full-year results. As well as lack of scale, weak economic growth had proved to be a stumbling block. The company also has a presence in China, South Korea, Malaysia and Thailand. Tesco shares gained 1.9% to 371.9p.
FTSE rises further
Today’s gains may be nothing like the advances seen yesterday, but the FTSE 100 has managed to make further progress following the Fed minutes.
Banks moved forward once more, even as the spat between the government and the banks over the upcoming Banking Commission report deepens.
All five of the big banks gained, with Lloyds and Standard Chartered leading the way with gains of over 1%.
Mining stocks also rose, as recession fears have abated for now. Vedanta Resources was the biggest gainer, up 3% to 1379p, while most of the other major names saw gains of 1% or more.
For now, markets are basking in the warm glow provided by expectations of further quantitative easing from the Fed. However, economic data has continued to err on the poor side of late, and it will be interesting to see whether more bad news will jolt markets out of their complacency.
US pre-market
US markets have enjoyed three days of gains, and September futures point to yet more gains for shares in New York. Dow futures are up 0.7%, while S&P futures are 0.9% higher.
It’s a fairly busy day for US economic data, with August ADP numbers due at 1.15pm, Chicago PMI at 2.45pm and factory orders at 3pm (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 31 August 2011: 6.00am Update
In the US overnight, stocks finished higher for the third consecutive session as participants shrugged off much weaker than expected consumer confidence data and the latest FOMC meeting minutes were released, showing that officials debated a third round of stimulus measures.
The NASDAQ was the top performer, adding 0.6%, while both the Dow Jones Industrial Average and S&P 500 rose 0.2%.
Asia & Australia
Across Asia, regional markets are mixed following the modestly positive leads seen overnight, with traders treading carefully ahead of a big couple of nights in US economic data. The Kospi and Hang Seng are the top performers, rising 0.7% and 0.4%. Elsewhere in spread bets news, the Nikkei 225 is flat while the Shanghai Composite is down 0.7%.
In Australia, the ASX 200 is currently 0.2% firmer at 4275, just off its daily high of 4278, having oscillated around the flat line for most of the session.
The best word for the Australian market today is mixed, with small advances being seen across the telecoms, materials, consumer discretionary and financial sectors. Elsewhere the industrials, healthcare and energy sectors are all trading marginally lower.
Europe
Despite positive leads from both Wall Street and Asia, European equities are eyeing a rather flat start to Wednesday's trade. Although the release of the FOMC meeting minutes offered little in the way of consensus as to precisely what the bank will do next, it does still leave the door open for further action. This may well help keep the general sentiment upbeat.
There’s a raft of high profile economic announcements due, however, in the coming days, and the risk of a degree of month-end profit taking. So it will be no great surprise if volatility now keeps ebbing away.
Unemployment and retail sales data out of Germany will be closely followed, whilst the Challenger job cuts and ADP payroll survey both offer something of a curtain raiser ahead of Friday's key non-farm payrolls.
Earnings news is looking somewhat subdued, although Carrefour and Vivendi stand to provide some interest in Paris.
Ahead of the open we're calling the FTSE unchanged at 5268, the DAX up 4 at 5648 and the CAC up 12 at 3172.
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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"Tesco Shares Rise as Supermarket Giant Pulls Out of Japan" last update by AG, 31-Aug-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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