Vodafone Spread Betting Market Rallies on Favourable Legal Ruling
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 20 January 2011: 10.45am Update
Markets fought hard to consolidate around their current high levels this morning, as the week’s rally looked slightly weak.
Gains by the leading index were held back by weak mining stocks, as Chinese data showed that manufacturing in the east-Asian giant continues to struggle.
By 10.40am (London time), the FTSE 100 was up 0.12% at 5748.32, while the FTSE 250 was up 0.15% at 10,825.29.
Yet another quiet opening session
As the week begins to wind down to its close, financial spread betting investors appear to be easing their foot off the accelerator and opting to book some profits.
It has been a good run up for markets, with good Chinese data at the beginning of the week providing the key starting point, with strong Eurozone bond issues and a good run of corporate data adding to the generally positive atmosphere.
Yesterday the banking sector helped the FTSE 100 to make further gains, with Barclays, Lloyds and RBS the best performers. These have managed to edge up again this morning, but the mining sector is holding the index back.
A reading from the HSBC PMI for Chinese manufacturing posted a weak start to the year for the world’s top user of industrial commodities, with the index rising only slightly to 48.8 for January, from 48.7 for the final month of 2011.
The January reading means the index has spent three months in contraction territory (below 50), signifying that the Chinese economy is still struggling to maintain its stellar rate of growth.
The China story remains a hotly contested issue for markets; it is widely acknowledged that the Chinese economy is slowing down, but bulls are hoping that the nation can manage a ‘soft landing’, where GDP growth does not slow below 7%.
China appears to be achieving this, but whether a nation of over one billion people, with all the Herculean problems of supply and demand attendant on this number, can maintain this tightrope act is a key question that will trouble markets throughout 2012.
UK retail sales back up in December
UK retail sales managed to rise appreciably during December 2011, up 0.6% during the month compared to a drop of 0.5% during November.
Volumes were driven by clothing and footwear, but the gain was achieved mainly through heavy discounting, used to tempt shoppers in during the Christmas period.
Retailers have been somewhat coy about admitting this, and even the radical slashing of margins did not prevent chains like HMV, Game and Tesco reporting falls in sales.
Judgment of Delhi goes Vodafone’s way
Telecoms giant Vodafone rose 1.8% to 177.7p after reports that a court in India had overturned an earlier ruling against the company.
The legal wrangle relates to a tax bill of the sale of an interest in an Indian business, and goes back to 2007.
Vodafone argued that the transaction was between two non-India companies, and it seems that the Supreme Court in Delhi agrees, freeing the company from any financial penalties.
Looking ahead
The week ends quietly for economic data in the US, with only existing home sales out during the afternoon, at 3pm (London time).
Dow futures point to a drop of 10 points for the index on opening, while the S&P 500 is currently forecast to start down 1.4 points.
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 20 January 2012: 6.00am Update
US markets extended their gains overnight on another round of positive economic data and encouraging earnings reports.
Jobless claims dropped to 352,000, below an estimate of 387,000. This is also the lowest level since April 2008.
The Philly Fed manufacturing index was below expectations, but building permits and CPI data were in-line with expectations.
On the earnings front, 22 of the 35 companies that have reported in the S&P 500 since 9 January have posted per-share profit that topped analysts’ projections.
Among the major averages, the Dow Jones Industrial Average climbed 0.4% to close at 12,624. The S&P rose 0.5% to 1315 and the NASDAQ advanced 0.7% to 2788.
Among the top performers were Bank of America, Morgan Stanley and eBay, whose earnings topped estimates.
Asia & Australia
Across Asia, equity markets are mostly higher after an encouraging night for risk assets.
The Nikkei is leading the way with a 1.2% gain, after the yen lost significant ground against the dollar overnight with USD / JPY trading above ¥77.
This scenario bodes well for Japanese exporters and has largely lifted sentiment for the Nikkei. Export giants like Panasonic, Sharp and Honda are enjoying solid gains.
Elsewhere in the region, China HSBC flash manufacturing PMI released today came in at 48.8, revealing that manufacturing activity failed to grow in January. That said, the contraction eased slightly.
The Hang Seng and Shanghai Composite retreated from their highs following the data and are currently each around 0.2% higher. This retreat brought the Hang Seng back below the psychologically-important 20,000 level, which it had reclaimed earlier.
Just like yesterday, the Australian market has spent the day drifting lower after a fairly strong open. This is not too surprising, as the end of the week generally sees some winding down of positions, particularly when there is fairly high risk from Greece heading into tonight’s session.
The ASX 200 is currently up 0.2% at 4223, after having traded as high as 4251 earlier. Chinese markets are closed next week for the Chinese New Year, so we could be in for a fairly quiet trading week in the Asian region.
US & Europe
With mixed leads in the Asian session, US and European markets are pointing towards a relatively flat open. European bourses may be looking delicately poised to break the October highs, but this fate will almost certainly hinge on the fortunes of the private sector debt swap talks, which should in theory be released over the next 24 hours.
The barrage of blue chip businesses which reported Q4 earnings just after the bell will get some focus, but it seems immaterial if we hear of negotiations breaking down again.
Google shareholders, who could not get out in post-market trade, will likely be sweating on the opening price action and just how painful things are going to be.
Other investors, however, will once again worry that the revenue streams out of Europe are clearly lagging those of the US, with their respective ad spends up 14.4% and 22%.
Intel’s result should please investors, as for the second consecutive year they have delivered better-than-expected growth. We would expect modest EPS upgrades and $30 seems reasonable to expect over the next twelve months if the global economy can muddle through.
US bellwether GE will command the attention of investors and by all accounts analysts are expecting a pretty messy quarter, due to potential GECS tax settlement gains.
The stock, however, has a history of underperforming, seeing losses eight out of the last ten earnings reports. So we have the clear two-way trade at the moment where one eye is on earnings, whilst the other is on any narrative out about the Greek debt talks.
One suspects Greece will trump any bottom-up story and whilst risk assets seem to be given the benefit of the doubt that a deal will be struck, there are many other variables that make the outcome far from clear cut.
Collective action clauses (CACs) could be used to force a higher participation rate, which could in theory trigger a credit default swap event and there is even a possibility the ECB could be in the mix as well. This could install confidence, but would see the central bank join the private sector in realising a loss.
There are no bond auctions to focus on today, so it is all about Greece. Whether we see the euro above $1.30 and European equity spread betting markets pushing above October highs will almost certainly come down to the outcome of the debt talks.
Ahead of the open we are calling the FTSE down 3 points at 5738, the DAX down 4 at 6412 and the CAC down 4 at 3325.
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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"Vodafone Spread Betting Market Rallies on Favourable Legal Ruling" last update by AG, 20-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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