Yen Spread Betting Market Rises Despite Japanese Credit Downgrade
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 24 August 2011: 11.00am Update
After a slow start, the FTSE 100 managed to make further gains, helped by several strong earnings updates.
However, underlying nervousness remains, preventing the bulls from pushing the index much higher.
UK markets have risen for a third consecutive day, as investors continue to look with anticipation towards Friday's Jackson Hole meeting.
Certainly, bad news from the US yesterday and poor Eurozone data today has failed to dent the rally, signalling that the entertaining 'bad news is good news' paradigm is back in fashion, as spread betting markets take weak economic data as a signal that further central bank support is likely.
Gold may have continued to edge back from its high of $1910, but even after a 14.5% fall yesterday, the VIX index, which measures stock volatility, remains at a level consistent with ongoing concerns.
FTSE rises, but gains muted
The FTSE 100 failed to follow the lead from the US last night and register major gains, but the leading index managed to remain in positive territory. The big five bank stocks all rose, helped by optimism that Ben Bernanke will step in to save the global economy on Friday.
Mining stocks were higher, partly thanks to a slight weakening in the US dollar and also thanks to continuing optimism about the Chinese economy following yesterday's manufacturing data.
By 10.15am (London time), the FTSE 100 was up 0.4% at 5150.87, while the FTSE 250 had gained 0.8% to 10,001.67.
Glencore goes shopping
Global commodities trader Glencore may have seen its share price steadily decline since joining the market in May, but this has not deterred it from making acquisitions. Glencore has begun an attempt to acquire full control of Australian nickel miner Minara, of which it already owns 73%.
It will offer 87 Australian cents per share, a 35% premium to Minara's price on Tuesday. The deal is the second Glencore has carried out since listing, having offered $475 million for a stake in a copper mine in Peru.
Moody's downgrades Japan
It would seem that not even a downgrade of Japan can halt the strengthening of the yen spread betting market. Moody's, which has continued to rate the US as AAA despite the S&P downgrade last month, has lowered its rating on Japan from Aa3 to Aa2, citing the ever-increasing size of the Japanese government's debt pile.
The agency added that regular changes of government (with another scheduled for 30 August), and the March earthquake and tsunami had made the recovery from the recession of 2008/9 more difficult.
However, the yen has continued to rise this morning, assisted by an ongoing weakness in the US dollar as markets remain hopeful of a further bout of quantitative easing in America.
US pre-market
US September futures are down, suggesting some reversal of the powerful rally seen yesterday. Dow futures are down 0.7% while those for the S&P 500 are 0.9% lower.
On the economic timetable for the day, the big event will be US durable goods orders at 1.30pm (London time), which are forecast to have risen 2% in July, following a 1.9% fall in June. Also published today will be weekly mortgage application data and the monthly house price index.
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 24 August 2011: 6.00am Update
Overnight, US equities had their best session in nearly two weeks as investors appeared to look beyond the recent doom and gloom to buy stocks trading on compelling valuations.
Some stability in European markets and a pullback in the price of gold were also small enticements for buyers to put money to work in equities.
Among the major indices, the Dow Jones Industrial Average added 3% to end at 11,176. The S&P jumped 3.4% to 1162, while the NASDAQ surged 4.3% to 2446. All 10 S&P sector indices closed higher, with technology, energy, materials and financials names among the best performers.
Asia & Australia
Across Asia, regional markets are mostly lower despite the strong performance on Wall Street overnight. The Kospi is the worst performer - down 1.2% - while the Hang Seng is lower by 0.9%. Elsewhere, the Nikkei is seeing a more moderate decline of 0.3%, while the Shanghai Composite is bucking the trend to be higher by 0.2%.
In Australia, the ASX 200 is currently 0.5% weaker at 4194, well off its earlier session highs of 4238. That the Australian market has given up earlier gains of more than 1.5% after a 300-plus point gain on the Dow overnight speaks volumes about the current lack of confidence in equities as an asset class. “Once bitten, twice shy”?
It seems many spread betting market participants may have sustained more than the odd bite over the last few months.
Europe
European equity markets are set to take their lead from Wall Street's strong finish last night as opposed to the rather more mixed start we've seen to trade in Asia in the last few hours.
There still seems to be this thought that Europe and the US are wrapped up in a relief rally, topped by the expectation that something good will be unveiled at the Fed's Jackson Hole summit later in the week.
With the UK fast approaching an extended weekend break, however, and that short selling ban scheduled to come off a number of European banking stocks on Monday, there's certainly plenty of scope on the downside even if Bernanke does deliver the goods.
Against these macro thoughts, the detail that's due over the next few hours is a little less compelling, although German IFO expectations and US durable goods orders could both inject some momentum into markets.
There's still a steady stream of earnings news due from London today as well, with Serco, Tullow Oil and Admiral Group among the higher profile reports. Across mainland Europe the likes of French hotel group Accor and Dutch brewer Heineken will be under scrutiny too.
Ahead of the open we're calling the FTSE up 45 at 5174, the DAX up 59 at 5591 and the CAC up 34 at 3118.
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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"Yen Spread Betting Market Rises Despite Japanese Credit Downgrade" last update by AG, 24-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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