US Spread Betting Markets Higher on Improved Consumer Confidence
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 30 November 2011: 11.00am Update
Fresh worries about the funding position of banks and an admission of failure by Eurozone finance ministers caused the current rally to fizzle out this morning. Risk sentiment remains susceptible to rumour and counter-rumour, with broad-based selling taking place as a result.
By 10.30am (London time), the FTSE 100 was down 0.18% at 5327.22, while the FTSE 250 had fallen 0.24% to 10,007.83.
Market rally fades
And it was all going so well. The three-day rally on the FTSE ground to a halt this morning, as a downgrade of banks by Standard & Poor's (S&P) and a confession from the economics whizz-kids in Brussels prompted investors to reduce their exposure to risky assets.
Sentiment had remained decidedly fragile over the past two days, predicated as it was on hopes that the Eurozone will, somehow, pull itself together and construct a reasonable and effective solution to the crisis. I warned that a disappointment was in the offing, and today's news is just such a disappointment.
S&P takes an axe to bank ratings
S&P, the ratings agency that prompted all the fun back in August with its downgrade of the US government's credit rating, announced that it had completed a review of the credit rating for 37 of the world's largest financial institutions.
It has changed the model so that it attributes more weight to the economic dangers and funding risks of individual countries. Of eight major American banks, seven were downgraded, including Bank of America, Goldman Sachs and Citigroup.
In Europe, UBS, Barclays and HSBC were cut, as S&P reminded shares spread betting investors that the funding network that sustains global finance is under severe strain as a result of the Eurozone crisis.
Eurozone disappoints yet again
When the last Eurozone summit ended, it was announced that the currency union had resolved to increase the size of its rescue fund to a total of €1 trillion, in order to provide funds for the rescue of either Spain or Italy (but not, it should be noted, both).
Now, we learn that it won't hit this target either. Jean-Claude Juncker, Eurogroup president, said that the rescue fund would still be substantially expanded, but he did not give an estimate of its final size.
Even worse, German finance minister Wolfgang Schaeuble said that plans for the rescue fund would be 'too intricate and complex' for investors to understand, adding that, by itself, the fund would not stem the crisis.
So, we have a fund that is too small to rescue the two currently endangered countries, a fund that is too complicated for people to understand (this then raises the question of why anyone would invest in something that they can't understand) and a fund that won't even solve the crisis that it was created to deal with.
This appears to prove the truth of Marx's saying: 'History repeats itself; the first time as tragedy, the second time as farce.'
Sage keeps growing
Accountancy software group Sage rose 1.9% to 280.3p after it managed to lift revenues ahead of forecasts for its full-year. Revenue of £1.48 billion was achieved, just ahead of expectations, with pre-tax profit up 8% to £352.6 million. There was a 25% increase in the full dividend, to 9.75p per share.
The company cautioned that macro-economic concerns would have an impact on the smaller companies that use its software, particularly in the Eurozone.
US pre-market
The build-up to Friday's non-farm payrolls figures starts today, with November ADP employment figures at 1.15pm. At 2.45pm, the Chicago PMI index is published, while the Fed's Beige Book survey of the US economy is out at 7pm (all London time).
US futures are currently down somewhat, off by 28 points for the Dow and 3.9 points for the S&P 500.
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 30 November 2011: 5.00am Update
US markets were mostly higher overnight after consumer confidence data came in significantly ahead of expectations.
The consumer confidence reading climbed to 56 from a previous figure of 40.9. The reading shows that consumers grew more optimistic about jobs and income prospects. In Europe, Italy’s bond auction failed to impress, but spread betting investors remained optimistic ahead of the Eurozone finance ministers’ meeting.
Among the major averages, the Dow Jones Industrial Average added 0.3% to end at 11,556. The S&P climbed 0.2% to 1195, while the NASDAQ lost half a percent to close at 2516.
Investors were encouraged by comments from Fed Reserve Vice Chairman Janet Yellen who said the central bank has leeway to spur the US recovery and reduce unemployment by purchasing more assets and clarifying its plan to sustain record-low borrowing costs.
Asia
Across Asia, regional markets are weaker after S&P reduced its credit ratings on several big banks in the United States and Europe on Tuesday as the result of a sweeping overhaul of its ratings criteria. The news saw US markets pull back into the close and erased all the gains we had seen in European markets overnight.
Sentiment had been initially lifted by strong US consumer confidence data, which came in significantly ahead of expectations.
Although S&P began warning the markets more than a year ago that it was revising its ratings, the announcement comes at a time when the markets for bank debts are fragile. The Shanghai Composite is the worst performer in the region, down 2%. The Hang Seng is 1.3% lower and the Nikkei is down 1%.
In light of the weakness we are witnessing in the region, we have seen US and European futures retreat, after having posted gains overnight. As a result, US and European markets are now pointing towards losses on the open.
Australia
The Aussie market is outperforming the region, with a relatively flat reading after having headed lower early in reaction to the S&P changes.
The news weighed on the financial sector, with most of the major banks losing ground early on. We have since seen a turnaround from this morning’s lows, with industrial names leading the charge. Data released later helped the market to recover some ground.
The materials sector is underperforming, with BHP Billiton and Rio Tinto down around 1% each. Australian new capital expenditure growth surged 12.3% in the 3Q, beating an expected 7.0% increase. The rise comes as the full force of the mining boom becomes apparent in Australia.
Locally, tomorrow’s session brings building approvals and retail sales data. Traders will also be looking out for China’s manufacturing PMI number, as well as HSBC’s final manufacturing PMI number.
There doesn’t seem to be a lot of UK domestic data to focus on, although GfK consumer confidence (released in early Asian trade) showed a modest improvement at negative 31. There is also a BoE financial stability report to look out for.
Traders will continue to monitor the situation in Europe closely, with this week’s bond auctions remaining the highlight. There are also a lot of economic announcements to look out for in Europe including a speech by ECB President Mario Draghi.
Ahead of the European open we're calling the FTSE down 44 at 5293, the DAX down 35 at 5765 and the CAC down 27 at 3000.
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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"US Spread Betting Markets Higher on Improved Consumer Confidence" last update by AG, 30-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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