Nikkei Spread Betting Market Plunges Over 7% on Fed Tapering Considerations
Posted on | May 23, 2013 | No Comments
Equity markets are taking a well-earned breather this morning after the latest Fed minutes sparked speculation that Chairman Bernanke’s asset purchase programme could dry up as soon as June of this year.
On the other hand, earlier assurances from the Fed chief suggested the taps will be left on whilst the recovery remains fragile.
In this context, the panic selling evident in Asia overnight looks completely overdone, with trading halts triggered as the Nikkei plunged over 7%.
Obviously weak data from China overnight didn’t help sentiment in the short term, but spread betting markets sent a very clear message to central bankers last night that if the free bar closes, everyone’s going home.
Utility stocks occupy the top spots on the FTSE 100 leader board this morning as a flight to safety combines with strong numbers from United Utilities and ongoing bid speculation to prop up the sector.
The remainder of the index makes for grim reading, though obviously this morning’s move has to be read in the context of recent gains.
If at the start of the year you had announced a May price target on the FTSE of 6730 you’d have been accused of wild over-optimism in many quarters.
Better-than-expected PMI Manufacturing measures out of France and Germany this morning helped raise investor spirits, though misses on the corresponding Services numbers quickly blunted the reaction.
In the context of last night’s panic, this afternoon’s Jobless Claims and New Home Sales data become huge market talking points.
As such, we could very well see bulls pinning their hopes on bad numbers in the hope that the Fed might be deterred from bringing down the shutters too early.
The Sales Trading desk at CMC Markets has seen clients with short index positions breathing a huge sigh of relief this morning as many of them unwind bearish trades and seek to re-assess conditions as the dust settles.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
Strong Profits See the Britvic Spread Betting Market Rally Over 9%
Posted on | May 22, 2013 | No Comments
UK equities have clung to recent gains in early trade despite the disappointment of a huge miss on Retail Sales data that paints a bleak picture of high street spending.
Spread betting investors appear to be pricing in the potential for the BoE to join the asset purchase party, though minutes from last month’s meeting show the committee continuing to oppose further QE by a split of 6-3.
Among the early risers this morning are Britvic, who made a fresh 5 year high before settling up over 9% on news of better-than-expected profits and huge potential cost savings over the next two years.
Property group Great Portland Estates are offered lower as brokers were underwhelmed by their earnings update despite impressive profit growth and rising asset prices.
The stock is still trading at 5 year highs after a phenomenal recent run, and this morning’s profit taking must be read in the context of 20% gains year-to-date.
Electricity supplier SSE see their stock testing all-time highs last seen in 2008, as the market reacts warmly to a 5.6% rise in net profits that will feed a 5% increase in the annual dividend this year.
It seems that the cold snap in the UK this winter helped to fuel impressive revenues.
Financing group Intermediate Capital saw assets under management increase by 13% over the reporting period and announced a final dividend of 13.7p/share as their investment portfolio remained ‘resilient’ despite the difficult economic backdrop. The stock is up over 50% YTD.
The afternoon calendar sees attention turn to crude inventory numbers at 15:30, with commodity price volatility very much in the headlines.
The day’s main draw however comes after the European close, with Fed Chairman Bernanke speaking prior to this evening’s FOMC minutes, as global investors seek an insight into the longevity of the Fed’s asset purchase plans.
Mr Bernanke is unlikely to deviate from his current stance given the fragile nature of the recovery and the dependence of financial markets on the accommodative policy proffered so far.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
FX Spread Betting: Will Hawkish Bernanke Comments Prompt USD Weakness?
Posted on | May 21, 2013 | No Comments
Yesterday’s US dollar decline, throws open a wider question and points to increased uncertainty over what Fed Chairman Bernanke will say to Congress tomorrow as well as the contents of the latest Fed minutes.
The question is whether the US dollar rally has run its course in the short term and could it be vulnerable to a correction with a rebound in the pound and the euro from recent five week lows.
While this isn’t just a US dollar story, what Bernanke has to say tomorrow will have a big bearing on the next move, not only in FX spread betting markets, but also equity markets.
UK Economic Data and Sterling
It is also a big week for sterling given the stronger than expected bounce back in some of the recent economic data.
Q1 GDP surprised, coming in as it did at 0.3%, above expectations of 0.1%.
The recent better-than-expected March industrial and manufacturing production data does suggest that this week’s latest adjustment to Q1 could be of the positive variety, even if many economists suggest otherwise.
Another factor driving sterling sentiment is also likely to be the release of the latest minutes from the most recent Bank of England rate meeting.
While many spread betting investors don’t expect too many surprises, one particular dynamic could well surprise with respect to the voting intentions of the three doves on the committee.
These three doves comprising of Fisher, King and Miles, have all called for an extra £25bn worth of QE.
In light of the recent improvement in UK data, could one or more of them be tempted to reverse their calls for this extra stimulus?
Any change here towards a slightly more positive tone could push back expectations about the need for further QE and underpin the pound in the short term.
This morning’s UK inflation numbers do appear to suggest that inflation pressure is starting to ease.
However, this could well unravel if the pound were to weaken markedly as a result of speculation about further easing measures, as import costs would inevitably slow down any decline in pricing pressures.
The recent improvements in UK data have the potential to push back speculation about further QE.
On the other hand, these benefits have been offset by speculation about the likelihood of the Federal Reserve starting to taper its asset purchase program from the current $85bn a month. This has pushed the pound down against the US dollar.
Fed Minutes and Asset Purchase Program
While many FOMC members have said that the Fed needs to start looking at some form of program, or exit strategy, it has been notable that the main noise has been coming from non-voting members of the committee.
The voting members appear to have been remarkably quiet on the issue.
This could be a deliberate ploy on the part of the Fed to test the temperature of the market on whether there is an appetite for such a policy.,
Moreover, it could be symptomatic of an ideological debate within the FOMC about the diminishing returns of the open ended nature of such a policy.
We are likely to get some additional colour tomorrow, but in the meantime, US markets continue to make new highs.
Judging by the current market movements, equity markets seem fairly relaxed about the prospects for tomorrow, continuing to move higher. Similarly, the US dollar has also rallied quite strongly, as bond yields continue to edge higher.
The key level to watch on the US treasury yield is around the 2% level. This needs to be overcome to suggest further US dollar strength. Any fall back towards this month’s lows at 1.62% is likely to translate into US dollar weakness.
EUR/USD
Judging by recent price action in the EUR/USD, we’ve seen some evidence of a potential change in sentiment on the US dollar vis-à-vis the recent declines in the euro with a sharp reversal of Friday’s decline.
This potentially bullish reversal suggests that traders remain a little nervous about being overly short of the single currency despite the poor economic fundamentals.
An improvement in the latest PMI data from France and Germany this week, as well as the final revision of German Q1 GDP and the latest IFO data could well keep a floor under the euro. The key support is identified as Friday’s lows at 1.2800.
GBP/USD
It’s a similar story with the GBP/USD, though the recent reversal isn’t anywhere near as conclusive even if the momentum indicators are relatively oversold.
To continue the recent rebound, we need to hold above last week’s lows at 1.5160, and push beyond the 1.5300 level to retarget a move towards the 1.5410 area.
One thing seems certain, any move in either the euro or the pound is likely to be driven more by what Bernanke and the Fed say tomorrow than anything else given future monetary policy expectations in Europe and the UK.
The likelihood is that he won’t say anything too hawkish given the patchy nature in US economic data and this could limit the potential for further US dollar upside in the near term.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
UK Spread Betting Markets Open Higher as the Nikkei Makes Fresh 5-Yr Highs
Posted on | May 20, 2013 | No Comments
UK blue chips have opened slightly higher this morning after strong overnight performance in Asia that saw the Nikkei make fresh 5-year highs as it closes in on 50% gains year to date.
A dearth of economic data in Europe this morning is mirrored across the pond, giving spread betting investors traders the opportunity to pause and assess ahead of key data later in the week.
One stock that continues to outperform is budget carrier, EasyJet, who have added another 50p to the share price on positive read-across from rival Ryanair’s earnings.
The stock has become something of a darling amongst analysts who have seen over 60% added to the price so far this year, and remain optimistic on the potential for further upside.
In the midcap space, pharmaceutical development group BTG find their stock offered over 3% lower despite reaffirming growth targets for the next 12 months and delivering improved net profits.
The stock has underperformed the market this year, up just 4% YTD, however with a forward PE of over 26 based on growth forecasts, some analysts believe this is a bit too optimistic and doesn’t exactly wet the appetite.
Campbell Soup will update the market on the earnings before the US opening bell with Urban Outfitters to follow after the close.
However, it seems likely that discussion over the longevity of central bank money printing will dominate trading desk chatter today.
Clients trading the volatility in mining stocks will be keeping a keen eye on underlying metals prices that continue to swing wildly on rumours of a major unwinding of long positions in the hedge fund space.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
Ocado Deal Sees the Morrisons Spread Betting Market Hit Record Highs
Posted on | May 17, 2013 | No Comments
European spread betting markets have slipped back this morning following last night’s late US sell-off.
Investors are struggling to tear themselves away from Beckham eulogies, with little of substance on the macro radar other than Michigan sentiment this afternoon to indicate any particular directional bias.
Even allowing for this morning’s slight weakness, equities continue to be fairly resilient.
This is despite further disappointing US data yesterday and increasing uncertainty regarding the tapering of bond purchases following comments from San Francisco Fed President John Williams.
Ocado has finally delivered on the rumours of a tie up with Morrisons, sending the stock soaring to all-time highs in a case of buy the rumour buy the fact.
The £216m deal sees Ocado supply the logistical infrastructure to the UK’s fourth largest grocer.
The move that is certain to rile its main client Waitrose, whose Managing Director, Mark Price, has already announced intentions to investigate the legality of the deal in light of its own supposed exclusivity agreement with the firm.
One of the big losers of the day so far is Intertek Group who sunk below the psychological 3300 level, down almost 5%, on news that its operating profit has narrowed considerably compared to last year.
It’s the biggest decline in the share price in 14 months as the consumer-goods testing company reported that profit will continue to drop in the second half of the year.
In light of a mixed Q1 trading report, John Menzies shares are also offered lower with the company citing reduced cargo volumes in its aviation business. The firm also noted a dip in its newspaper and magazine distribution company following an exceptional 2012 for the 180 year old firm.
Another stock on the slide is FLSmidth in Denmark who are down 5.5% after announcing a net income of 37 million krone in the first quarter which falls well short of market expectations.
They blame market uncertainty, general customer hesitation and a lack of efficiency within the company.
Although present trading remains reasonably robust, the management outlook for the second half of the year is resoundingly bearish and shares spread betting investors will have to batten down the hatches in the short term.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
Aviva Spread Betting Market Rallies amid Upbeat Q1 Earnings
Posted on | May 16, 2013 | No Comments
Equity markets have largely held their levels this morning, propped up by positive sentiment over recent earnings announcements and growing confidence that central bank policy will remain accommodative in the medium-term.
Aviva are leading the blue chip index, up almost 5% after reporting an 18% surge in new business during Q1 that fed stronger earnings during the period.
Private equity group 3i are down despite upping their cost reduction targets, as a smaller than expected growth in reported net asset value disappointed investors early on.
Telecoms group, TalkTalk trade over 6% higher after reaffirming targets for 2013 and offering positive wording on the outlook for their business. Bank of America warmed to the statement and are bullish on the stock.
Building supplies specialist Travis Perkins have also gone better bid despite reporting a fall in sales as construction activity slowed during the winter cold snap. The group are confident of recovering the ground later in the year and reaffirmed their targets for FY13.
Electronics retailer Dixons see their stock climbing to 4-year highs this morning after earnings beat average estimates, with tablet sales being a key revenue driver.
The shares spread betting market is up over 6%, though with a forward PE in the 30′s and the consumer environment in the UK still mixed, it would take a strong nerve to go piling in at these levels.
European CPI data arrived in line with expectations at 10:00, so eyes turn to the US measure at 13:30, along with Housing Starts data and the key Jobless Claims measure, as spread betting investors seek impetus for the next push higher.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
Shares Spread Bets: Easyjet Outperforms as H1 Losses Decline
Posted on | May 15, 2013 | No Comments
Flash GDP estimates from Germany and France underwhelmed the markets early this morning, missing analyst estimates as the fog refuses to clear from the Eurozone economy.
With recovery optimists so dependent on the occasional glimpse of sunlight from Germany, their miss was particularly disappointing.
Whilst European Shares spread betting markets have generally eased back as a consequence, UK bluechips are largely flat in early trade as a slew of positive earnings updates buoyed investor sentiment.
Top of the leader board are budget carrier EasyJet, who provided positive guidance for the year after successfully tapering losses in H1. Revenues were driven by strong demand for flights from the UK as Brits sought to escape the extended winter chill.
In a similar vein, TUI Travel are trading higher after the board outlined a target of $1.3bn in full-year profits, and promised a dividend return to shareholders later in the year.
Property giant Land Securities saw their stock trading at fresh 4-year highs at the open as the net asset value of their portfolio rose to 903p per share (circa 95%) and rental vacancies decreased during the quarter.
With several high profile development projects in the offing for the remainder of the year, shareholders will be hopeful of further growth over during 2013.
Shares in the London Stock Exchange have also found support as Q1 earnings beat expectations on strong revenues. CEO Xavier Rolet also offered encouraging guidance on the recovery in the IPO market that will potentially have positive consequences for the group later in the year.
Restaurant Group have managed to overcome the difficult consumer environment in the UK to deliver impressive revenue growth that leaves them seeking aggressive expansion over the remainder of the year.
Up to 35 new restaurants are currently planned, inspiring renewed optimism amongst investors who have sent the share price to all-time highs this morning.
Less impressive numbers from ITV, who are pessimistic about advertising revenues in Q2, and Wood Group, who saw costs overrun on key projects during the period, have taken the steam out of their respective share prices.
Nevertheless, an unexpected fall in the UK unemployment rate rounded off what has generally been a good news morning in the UK.
Eurozone group GDP estimates at 10:00 will likely disappoint given the constituent numbers we saw pre-market, and attention will turn to Producer Price Index and Industrial Production data due from the US this afternoon.
Cisco, Deere and Macy’s are all due to report earnings later today, and bulls will be hoping for a continuation of the corporate tone set in this morning’s session.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
Severn Trent Spread Betting Market Rallies amid Kuwait Investment Office Approach
Posted on | May 14, 2013 | No Comments
Whilst blue chip stocks generally struggled to hold onto early gains this morning, water services group Severn Trent were flying high after receiving an initial approach from a consortium including the Kuwait Investment Office.
Whilst the potential bidders have made clear that a full approach in not certain, the market reacted with excitement to the news, marking the stock up over 15% early on. Sector peer United Utilities enjoyed some read-across support at the open, bid 4% higher.
The broader market malaise is arguably a case of spread betting investors seeking impetus for the next leg up and finding none on what is a relatively quiet news day. The highlight of the session’s economic calendar was the German ZEW Survey, but it failed to inspire a turnaround in the major indices, arriving lower than consensus forecasts.
British Land have edged marginally better after their numbers saw analysts surprised by a higher than expected rise in new leases, though Investec took the contrarian stance, recommending a reduced weighting in the stock to their clients.
Inter-dealers ICAP see their stock performing strongly this morning as full year earnings beat analyst forecasts. The broker was able to cut additional costs during the period, and offered a positive outlook for 2013 after a mixed start to the trading year.
Support services specialists Babcock are also in demand after meeting estimates for full year profits and hiking their dividend. Shares spread betting investors have responded positively to bullish guidance from the board for the remainder of the year, and sent the stock to fresh all-time highs.
With indices stubbornly holding their levels around the recent highs the Sales Trading desk at CMC Markets continues to see clients taking a dim view of equity market strength, with shorts positions accounting for 80% of current flow in the major indices.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.
USD/JPY Spread Betting Market Hits 4-Yr High as Yen Decline Continues
Posted on | May 13, 2013 | No Comments
Owing to the UK bank holiday, European markets started last week trading fairly flat with thin volumes to match. Asian shares advanced on the back of better than expected U.S jobs data released on Friday.
The Dow closed above 15,000 on Tuesday for the first time, a significant achievement that highlights the importance of the U.S employment figure to traders. Additionally, the Dax index closed at a record high on Wednesday, with investors seeing better returns from equities than bonds. Bond yields have been driven lower as a result of interest rate cuts from major banks.
Draghi confirmed earlier in the week the ECB’s readiness to cut interest rates further if the economy continues to deteriorate. The dollar quickly made significant gains against the Euro as investors prepare for the possibility of further rate cuts.
The Reserve Bank of Australia also took action by cutting the benchmark interest rate to 2.75%, a record low. Along with better than expected employment data, the rate cut has lifted regional shares.
Economic data remains in a goldilocks range, whereby it is weak enough to warrant continued stimulus, but strong enough to keep earnings expectations positive. With the FTSE 100 having achieved significant gains, adding nearly 12% since the start of the year, the index seemed to finally be stabilising at its multi-year peaks with an upward trend still intact.
In a somewhat contradictory move, the ECB refrained from committing to further interest rate cuts. Draghi made it clear now that we will have to wait until 2015 until the possibility of further reductions. It was only on May 2nd that Draghi declared the ECB’s readiness to act again if required.
The Bank of England also decided to leave interest rates on hold and resisted calls to extend its bond purchases. Policymakers are opting to wait and see if recent initiatives to boost lending will lift the struggling economy.
Japanese shares surged last week on the back of a weakening yen. The USD/JPY market went beyond the 101 level for the first time in 4 years. The yen has now tumbled 23% since September, heading for its biggest annual loss since 1979.
In shares spread betting, Sainsbury’s suffered a slight fall in annual profits amid the intense battle among supermarkets to grow market share. It made a pre-tax profit of £788m in the year to March 16 – down 1.4% on the previous 12 months.
Chief executive Justin King also confirmed he had reached an agreement with Lloyds Banking Group to take full control of Sainsbury’s Bank, at a cost to the chain of £248m.
A revised German trade balance figure for the previous month helped push the Dax over the 8300 level during Friday’s session for the first time. The FTSE rose yet again after better than expected earnings from Arcelor Mittal and BT Group.
Going into this week, investors will be searching for clues as to whether or not the rally seen in the past week or so is sustainable.
You can be certain that many traders will go short of equities and indices hoping that they have entered at the highs, but there is a growing consensus that this could be the start to a long period of growth.
This Week’s Notable Economic Events:
Monday
- USD Core Retail Sales
- USD Retail Sales
Tuesday
- DE German ZEW Economic Sentiment
- AUD Annual Budget Release
Wednesday
- GBP Claimant Count Change
- GBP BoE Gov King Speaks
- GBP BoE Inflation Report
- CAD Manufacturing Sales
- USD PPI
Thursday
- USD Core CPI
- USD Unemployment Claims
- USD Philly Fed Manufacturing Index
Friday
- CAD Core CPI
- USD Prelim UoM Consumer Sentiment
Next Week’s Notable UK Earnings:
Monday
- The Unite Group PLC Interim Management Statement
- Diploma PLC Interim 2013 Earnings Release
- Lonmin PLC Interim 2013 Earnings Release and Q2 Production Report
Tuesday
- British Land FY 2012/13 Earnings Release
- Enterprise Inns PLC Interim 2013 Earnings Release
- ICAP Preliminary 2013 Earnings Release
- Babcock International Preliminary 2012 Earnings Release
- Balfour Beatty Q1 Interim management Statement
- Capita PLC Interim Management Statement
Wednesday
- Compass Group Interim 2013 Earnings Release
- Greggs Interim Management Statement
- Land Securities Preliminary 2012/13 Earnings Release
- Keller Group Interim Management Statement
Thursday
- Vedanta Resources Preliminary 2012 Earnings release
- Euromoney Institutional Investor Interim 2013 Earnings Release
- TalkTalk Telecom Group Preliminary 2012 Earnings Release
- Travis Perkins PLC Interim Management Statement
Spread betting is a leveraged product. It carries a high level of risk to your capital and, as it is possible to lose more than your initial investment, it may not be suitable for all investors. Therefore, ensure you understand the risks involved and seek independent advice if necessary. The tax treatment of spread bets may be subject to change in the future.
Article by Spreadex.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Financial Spread Betting Investors Short Indices Despite Record Highs
Posted on | May 9, 2013 | No Comments
The FTSE largely shrugged off mixed Industrial Production data out of the UK at 09:30 as European equities took a collective pause after the frantic optimism of yesterday’s session.
With the UK base rate unlikely to move from 0.5% when the announcement arrives at 12.00, the macroeconomic focus may shift to Jobless Claims data due from the states at 13:30. Focus here is likely, given the variance in employment data we’ve seen in recent weeks from the US.
As we continue to forge new highs, a significant proportion of our client base are establishing shorts in the spread betting indices. These are either in the form of a hedge against long equity positions or as a bet that the ever-widening disparity in risk asset prices and macroeconomic data has reached unsustainable levels.
One of the problems with being short on a market that is breaking all-time highs (aside from the obvious one) is that there is no technically sensible level at which to cut the position – no resistance point beyond which you accept you’re wrong.
If a client takes the view that equities are collectively overvalued with the Dow at 15,000, there’s no logical reason to change that view at 15,300 or 15,500.
When there is no level where you know you’re wrong, trades contrary to general market direction can become an obsession, with financial spread betting convinced that the market ‘must turn around soon’.
The market needn’t do anything of the sort. Retail clients must be wary of this particular pitfall in this bull market environment.
Amongst the top performers this morning are credit giant Experian, who announced a bump in the annual dividend after delivering full year profit in line with market expectations.
The firm also offered optimistic guidance for the coming year and extended their share buy-back programme, prompting traders to send the stock 5% better bid early on.
Investment group, Old Mutual, also see their stock in the green this morning after announcing a 7% rise in funds under management during a positive first quarter. The board outlined its confidence for the coming year as the share price climbs to all-time highs this morning.
In the insurance space, mid-cap Beazley pleased investors this morning with an 11% rise in Q1 premiums to $518m. The analyst community was suitably impressed with their progress, and none of the firms covering the stock recommend selling shares despite an astronomical 35% rise year-to-date.
Aside from Jobless Claims before the opening bell, today also sees the release of earnings updates from Priceline and CableVision, as the market seeks a catalyst to extend its record gains.
Please remember that Spread Betting, FX and CFDs are leveraged products and carry a high level of risk to your capital. It’s possible to lose more than your initial investment. These products may not be suitable for all investors, please ensure you understand the risks involved and seek independent advice if necessary.
Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither CMC Markets nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.