Tullow Oil Sees Shares Plummet as Investors Ignore Positive Reports
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 18 January 2011: 10.15am Update
Greek debt negotiations and upcoming results from Goldman Sachs injected a note of caution into markets this morning, although the FTSE still shows a marked reluctance to push much lower than 5600 at present.
By 10.00am (London time), the FTSE 100 was down 0.23% at 5680.33, while the FTSE 250 had risen 0.3% to 10,625.20.
Markets drop slightly, caution abounds
Markets edged lower this morning as decision day dawns for Greece and its bondholders. The embattled nation, which has been at the centre of the Eurozone crisis since the whole saga began in late 2009, returns to talks today with its creditors, after reaching an impasse on Friday.
Greek officials are pressing for a haircut of around 68% on its bonds, with creditors receiving around 32 cents for every dollar of debt, but some private bondholders object to this.
If a deal is not achieved soon, Greece faces the very real possibility of default in March. A failure to reach agreement today could even prompt Greece to push the nuclear button, defaulting and declaring an intention to leave the euro sooner than March.
The general atmosphere this morning is uncertainty; spread betting investors are worried that Greece might yet cause a serious upset, while others fret about Citigroup’s results yesterday, which were weaker than expected.
Goldman Sachs reports its earnings today, and a repetition of Citigroup’s performance yesterday could make a serious dent in the gains made by markets so far in 2012.
Optimists in global markets will look to today’s bond auctions, by Germany and Portugal, for hope, on the basis that strong demand for government debt signals that investors are not yet too scared to purchase bonds issued by Eurozone nations.
However, today’s auctions are for short-term debt, and strong demand is likely, with banks using the bonds as collateral to park cash with the ECB, a trend that has gathered strength in recent weeks.
UK unemployment up yet again
The unemployment picture in the UK continues to remain bleak, with the unemployment rate up to 8.4% for January, the highest level since January 1996.
A total of 2.68 million people are out of work, the highest level since 1994. Britain’s economy has remained fairly stagnant over the past five months, and predictions of a new recession abound.
With the Eurozone crisis still looming over us all, sapping confidence, the situation is hardly likely to get much better.
Tullow shrinks, Man recovers
Tullow Oil dropped 6.6% this morning to 1358p, as investors ignored the report of a good 2011 and focused on delays to production at the firm’s Jubilee field.
Production at the field dropped back in late 2011, and technical issues will delay the ramp-up in production to later in 2012.
Raised commodity prices during 2011 lifted profits, with 2011’s ultimate level of sales expected to be double that of 2010.
Man Group however was in fine form, up 5% to 113.1p, cheered by news that fund redemptions had slowed at the hedge fund manager.
$5.6 billion in funds was redeemed in the final quarter, but this was better than the dreadful $7.3 billion seen in the third quarter of 2011. Nonetheless, funds under management still fell $6 billion to $64.5 billion.
Man was glad to see the back of 2011, but with the shares down 10% so far in 2012, it looks as if the new year won’t be much better.
Looking ahead
Dow and S&P 500 futures are barely changed so far this morning, suggesting a slow start to the day for Wall Street.
US data is abundant this afternoon, although of limited moment, with producer price inflation and industrial production for December published at 1.30pm and 2.15pm (London time) respectively.
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 18 January 2012: 6.00am Update
US markets flew out of the gates overnight, on the back of strong leads from yesterday’s Asian session in a broadly ‘risk-on’ environment.
Sentiment was also lifted early by some strong economic numbers out of Europe and the US. However, stocks drifted lower towards the end of the session as the market digested some underwhelming earnings reports in the banking space.
Among the major averages, the Dow Jones Industrial Average climbed 0.5% to close at 12,482. The S&P rose 0.4% to 1294 and the NASDAQ advanced 0.6% to 2728. Disappointingly, the S&P retreated from its early highs above 1300.
From a technical perspective, this is a key level the bulls need to overcome and a close above 1300 would be encouraging.
Asia & Australia
Across Asia, equity markets are treading water with a slightly positive bias after yesterday’s strong move higher.
The Nikkei and the Hang Seng are around half a percent higher while the ASX 200 is up 0.3%. Resource stocks have been a talking point in Australia after mining giant BHP Billiton posted its quarterly production report this morning.
The report has been well received and largely beat estimates with solid numbers in the three key businesses of iron ore, petroleum and base metals.
BHP’s shares are around 0.7% higher and are helping the Australian market stave off weakness in the financial sector.
In other news, the World Bank has cut its global growth forecast to 2.5% (from 3.6%) and warned the globe is on the edge of a new financial crisis.
Europe
After having drifted lower into the close, US markets are now pointing towards slight gains at the open. However, European markets are pointing towards a slightly weaker open as they are yet to react to the pullback we saw in US markets.
Despite a fairly benign Asian session we have seen our opening calls creep into positive territory ahead of what are arguably a key few days in global markets.
A weaker open on the three major bourses is expected as it stands and all eyes now firmly focus on the resumption of the Greek debt swap talks. According to reports these are progressing reasonably well with a deal that could potentially result in a 68% haircut on Greek debt.
Optimism that perhaps the IIF and Greek government could miraculously conjure up an agreement on the size of the coupon and maturity is keeping the single currency reasonably well bid. Having said that, you get the sense that FX spread betting investors are staying put and waiting for a move to $1.2820 to sell or a dip to the mid $1.26 to buy.
Whether we get an agreement, which if all the planets align for Greece would see it back onto the path of debt sustainability, it is clear that many feel this cannot happen and Greece is insolvent and according to Fitch overnight, likely to default.
The World Bank
The World Bank cut its 2012 global growth forecast from 3.6% to 2.5%, which would now be below consensus and is their biggest cut in three years.
They also suggested that despite positive economic numbers out of the US it would take many, many years for the US to recover and reduce unemployment.
Tonight Goldman Sachs come to market with their results, with the KBW banking index delicately poised to break its 200-day moving average to the downside.
EPS is expected to come in at $1.23, although when you see a range of 70 cents to $2.50 you get the sense there could be some volatility as clearly it’s going to disappoint someone’s forecasts.
Expect equity trading revenue to see a sharp decline, whilst fixed income and currency trading could fall around 3%.
It is worth pointing out that Goldman’s has beaten EPS estimates six out of the last eight quarters, although the stock has fallen 60% in the last five earnings reports.
On the data side the UK jobless rate is expect to stay flat at 5%, with a modest increase of 7000 new claimants joining those looking for work.
US data will concentrate on industrial production which is expected to grow 0.5%. Germany and Portugal come to market trying to auction short-dated bond and bills.
Ahead of the open we are calling the FTSE down 8 points at 5686, the DAX up 6 points at 6339 and the CAC down 4 points at 3266.
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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"Tullow Oil Sees Shares Plummet as Investors Ignore Positive Reports" last update by AG, 18-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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