US equity markets felt the wrath of disappointed investors this afternoon, with the Dow Jones Industrial Average falling more than 1% during the first hour of trading, following worse-than-expected quarterly figures from industry bellwethers General Electric and Bank of America.

Shares of General Electric, which is the world’s biggest manufacturer of jet engines, fell 3.2% to $16.26 after unveiling third-quarter sales that were nowhere near expected. The industrial conglomerate’s third-quarter sales plunged 20% to $37.8 billion, trailing Bloomberg’s median estimate by nearly $2 billion.

The drop in sales came on the back of weaker medical machine sales and poor results from its financial services arm.

Also, General Electric’s third-quarter profits from continuing operations were 45.3% lower than last year’s comparative at $2.45 billion, or 22 cents a share, which is just 2 cents above Bloomberg’s average forecast.

Bank of America was also in the red, tumbling 4.4% to $17.30, after reporting a bigger-than-expected net loss of $1 billion in the third quarter, as customers continued to struggle to pay credit card and mortgage bills. The lender’s quarterly loss compares with a profit of $1.18 billion a year earlier.

‘The idea that the financial crisis is over is a fantasy and it looks like the numbers bear that out,’ said Harvard University professor Niall Ferguson on Bloomberg Television today. ‘It’s clearly not over for Bank of America.’

By 3:40pm (London time) the Dow Jones Industrial Average was 101.72 points (-1.01%) lower at 9961.22 while the broader S&P 500 was 11.98 points (-1.09%) below its previous close at 1084.58.

The Nasdaq fared slightly worse, down 22.88 points (-1.22%) to 1731.96 after International Business Machines, the world’s largest computer-services company, said new contract signings fell in the third quarter – an indicator that future business is clearly not going to be as strong as the market initially expected.

IBM also unveiled a 6.9% drop in third-quarter sales of $23.6 billion and third-quarter net income of $3.21 billion, or $2.4 a share, in-line with consensus expectations. IBM’s shares slid 4.5% to $122.18.

Chip-maker Advanced Micro Devices was another casualty, falling nearly 7% to $5.76 after predicting that fourth quarter sales will be ‘up modestly’ – clearly not something we wanted to hear.

In contrast, Google managed to jump 3.9% to $550.45 after reporting profit and sales that exceeded analysts’ estimates. The internet advertising giant said it stands to benefit from increased demand for online ads and e-commerce, as the economy recovers.

US economic news was mixed today, with US Industrial production rising 0.7% in September, exceeding expectations for a 0.2% increase. American capacity utilisation also improved in September, coming in at 70.5%, ahead of Bloomberg’s median forecasts for a rise to 69.8% and the prior month’s 69.6%.

Disappointingly, however, was the Reuters Michigan consumer sentiment index, which slid sharply to 69.4 in October from 73.5 the previous month. ‘This is probably giving us a more accurate reading of what consumers are feeling,’ said Nigel Gault of IHS Global Insight. ‘They’re very concerned about how long unemployment is going to stay high, and they’ve very concerned about their own personal finances.’ [1]

Elsewhere, November Light Sweet crude oil rose to $78.17 a barrel today, following a drop in fuel inventories. Technical analysts at Citi FX believe that crude oil may breach its 200-week moving average, which was $74.98 a barrel last week, and rally to $85 a barrel.

‘If that happens, we think a move to at least $85 could be on the cards with some interim resistance just above $80,’ Tom Fitzpatrick of Citi FX said. Such a move ‘is likely to confirm the directional bias for the rest of this year.’ [2]

October gold futures were also in demand, climbing 0.6% to $1056.2 an ounce this afternoon.

[1] [2] Source: Bloomberg News (15 October 2009)

By Anthony Grech, Research Analyst, IG Index.

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Wall Street opened lower, as earnings at Goldman and Citigroup failed to excite the market.

We’re seeing some profit taking today, not because the figures are disappointing but mainly because the markets have, undeniably, risen quite a bit recently and today’s data may have already been factored in. Essentially, we’re seeing a classical ‘buy on the rumour sell on the news’ scenario.

Goldman Sachs today reported third-quarter earnings that exceeded analysts’ estimates after profiting from trades made with its own money.

The bank, which was recently downgraded from ‘buy’ to ‘neutral’ by banking analyst Meredith Whitney reported third-quarter net income of $3.19 billion, or $5.25 a share today. This was nearly 11% higher than Bloomberg’s most optimistic analyst estimate of $4.75 a share and substantially ahead of last year’s comparative of $845 million, or $1.81 a share. Earnings were, however, 7.3% lower than the second quarter’s record $3.44 billion.

Third-quarter revenues also exceeded expectations, doubling to $12.4 billion from $6.04 billion in the previous year. Revenues from fixed-income, currency and commodity trading surged 274% to $5.99 billion and revenues from equities up 78% to $2.78 billion.

Citigroup, which is 34% owned by the American taxpayer, also defied analysts expectations by unveiling a $101 profit compared with a loss of $2.82 billion the same comparative period a year ago.

On a per share basis, Citigroup incurred a loss of 27 cents a share, however, owing to a charge related to the exchange of certain preferred shares into common stock. The loss per share was, nevertheless, smaller than Bloomberg’s median estimates for a 29 cent loss.

Now here’s the thing, Citigroup was ahead of expectations because management were less prudent with the bank’s loan loss reserves - something that could come back and haunt the bank in coming quarters. ‘They are being overly optimistic on the outlook for loan losses,’ said Jon Fisher of Fifth Third Asset Management. ‘We are going to find out in a couple of quarters that they are way under-reserved and they are going to have to take a huge charge.’ [1]

Goldman’s shares fell 2.12% to $188.18 while Citigroup plunged 4.6% to $4.77 a share this afternoon. Bank of America retreated 2.8% to $18.06 while Wells Fargo edged 0.8% lower to $31.08

On the economic front, the Labor Department’s jobless claims figures signalled some life returning to the embattled American labor market.

The number of Americans claiming first-time jobless benefits (initial jobless claims) unexpectedly fell 10,000 to a seasonally adjusted 514,000 in the week ended October 10, the lowest level since January. This was better than Reuters expectations for a rise to 525,000 from a previously reported 521,000 the week before.

In the meantime, the four-week moving average for initial claims dropped by 9,000 to 531,500 last week, the sixth straight weekly decline.

Even more encouraging, the total number of American collecting unemployment benefits for more than week dropped by 75,000 to 5.99 million in the week ended October 3. That was the first time that the so-called continuing claims had dropped below the 6 million mark since late March. This measure has trended lower for four consecutive weeks.

Although a drop in jobless claims may be positive, the fall could also suggest that unemployed Americans have exhausted their unemployment benefits. However, in view of today’s remarkable manufacturing data, I think the drop in claims is pointing more to a recovery than anything else.

The manufacturing data released from the Federal Reserve Bank of New York surprised to the upside, with manufacturing activity in the region unexpectedly expanding for a third straight month in October.

The bank’s general economic index surged to a reading of 34.6 this month, the highest in five years, from 18.9 in September. The majority of economists surveyed by Bloomberg expected the Empire manufacturing gauge to drop to 17.3.

A separate regional manufacturing survey, meanwhile, revealed that activity in the Philadelphia region continued to expand this month, yet slower than expected. The Federal Reserve Bank of Philadelphia’s general economic index dropped 2.6 points to 11.4 in October, which was slightly larger than Bloomberg’s expectations for a drop to 12.

Elsewhere, the Consumer Price Index and core consumer price index, which strips out volatile food and energy prices, both gained 0.2% in September, in line with consensus expectations.

‘Inflation remains muted,’ said Jennifer Lee of BMO Capital Markets. ‘There is still much excess capacity to absorb; retailers are still fighting for their share of consumers’ shrinking wallets.’ [2]

By 3:55pm (London time) the Dow Jones Industrial Average was 22.82 points (-0.23%) in the red at 9993.04 while the broader S&P 500 was 3.55 points (-0.33%) lower at 1088.47.

Back in London, markets were also under some pressure, with the blue-chip FTSE 100 down 14.81 points (-0.28%) at 5241.29.

Sainsbury’s was in the limelight this afternoon, surging nearly 20% to 373p a share on takeover speculation. Analysts at Royal Bank of Scotland said that the ‘Sainsbury family have accepted a 420p bid’ from Qatar.

‘A 420p bid in our view would seem way too low,’ wrote Justin Scarborough of Royal Bank of Scotland in the note today. ‘We would of course never say never, but the family would not accept 600p back in November 2007, which led to the Qataris walking away.’ [3]

Source: [1] [2] [3] Bloomberg News (15 October 2009)

By Anthony Grech, Research Analyst, IG Index.

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London’s leading index continues to find form in the afternoon session, with the FTSE 100 currently sitting at 5241.45 at 3.15pm (London time).

Miners continue to set the pace with Rio Tinto and BHP Billiton both up on the day. Rio Tinto’s share price benefited as third-quarter iron ore production rose to a record level, due to demand from steelmakers in China.

Rio has so far gained 4.55%, with the share price at 2977.50p. While a decline in Chinese exports helped BHP Billiton Ltd, as copper led a rally in metal prices. The world’s largest mining firm managed a gain of 4.2% to 1838.50p.

Oil continues its five-day rally and has set a high for the year of $75 a barrel. The recent drive we have seen for commodities over the past week has a lot to do with the weakening Dollar.

Gold benefited last week, and now it is the turn of oil. However, analysts have been quick to point out that any rally could be easily halted if the Dollar finds strength.

Over in the US, we have seen a mixed bag in terms of data releases. The US Commerce Department announced that retail sales have fallen by the largest amount in 2009, driven by a fall in car sales and the end of the country’s car scrappage scheme.

However, this was less than analyst expectations, with retail sales falling by 1.5%, less than the expected 2.1%, indicating that the economy is still recovering.

Banking giant JP Morgan beat forecasted profits for the period between July and September by posting a net income of $3.6 billion, compared with $527 million for the same period last year.

The bank had benefited from the impact of buying most of the assets of Washington Mutual. The strong performance by JP Morgan helped the bank to add $1.31 to its share price, bringing it to $46.97.

This positive sentiment also helped the Dow Jones to open strongly. By 4.00pm (London time), the Dow Jones Industrial Average was trading 105.65 points (+1.07%) higher at 9976.71, the broader S&P 500 was also up 12.24 points (+1.14%). The Nasdaq was also in positive territory, up 23.12 points (+1.08%) to 2163.01.

It will be interesting to see what Goldman Sachs, Bank of America and Citigroup post when they announce their third-quarter profits later in the week.

Tomorrow in the UK look out for the full-year results from WH Smith, while over the pond expect investors to be watching out for the Fed’s Empire State manufacturing survey, as well as third-quarter earnings from technology giant Google.

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Wall Street opened in negative territory following disappointing quarterly sales figures at Johnson & Johnson. We also had prominent banking analyst Meredith Whitney downgrading Goldman Sachs today, so it’s not surprising to see some profit taking.

Wall Street opened in negative territory following disappointing quarterly sales figures at Johnson & Johnson. We also had prominent banking analyst Meredith Whitney downgrading Goldman Sachs today, so it’s not surprising to see some profit taking.

Shares of the world’s biggest healthcare products maker Johnson & Johnson retreated 2.6% during the first hour of trading to $60.91 after revealing third-quarter sales that fell short of consensus expectations.

Revenue at Johnson & Johnson declined 5.3% to $15.1 billion in the third quarter, below Bloomberg’s median analyst forecast of $15.2 billion. The drug maker said sales were eroded by competition from cheaper generics.

The company’s quarterly earnings came in above expectations, however, at $3.35 billion, or $1.20 a share, up from $3.31 billion or $1.17 a share, the year before. In the meantime, third-quarter profits (excluding certain one-off items) beat Bloomberg’s median analyst estimate by 7 cents.

Johnson & Johnson also raised its 2009 earnings forecasts to a range of $4.54 to $4.59 a share (excluding adjustments from special items). This is better than earlier estimates of $4.45 to $4.55 a share.

The market’s reaction to Johnson & Johnson’s quarterly results could suggest that it’s no longer good enough to deliver better-than-expected earnings. The market may now want to see some evidence of top line growth, which may be a challenging feat to pull off at this juncture.

Also tainting sentiment today was Goldman Sachs’ downgrade by renowned analyst Meredith Whitney. Meredith downgraded Goldman Sachs from ‘buy’ to ‘neutral’ today, saying she was ‘far less bullish’ on banking shares. [1]

Goldman Sachs, which is scheduled to announce its earnings on October 15, fell 2.1% to 186.14. Bank of America declined 1.9% to $17.69, and Wells Fargo slid 1.2% to $29.93.

Commercial lender CIT Group also made the headlines today after its chief executive Jeffrey Peek said he is planning to resign this month. Shares in the embattled company plunged 13.2% to $0.903 a share.

In technology news, networking giant Cisco Systems announced that it will be acquiring wireless firm Starent for $2.9 billion in cash, equivalent to $35 a share.

‘Cisco sees the consumer trend toward the pervasive adoption of mobile devices,’ said Joanna Makris of Brigantine Advisors, who recommends holding Cisco shares and buying Starent. ‘They want to find a way to drive network traffic and the growth of their infrastructure business.’ [2]

Cisco’s share rose 0.7% to $23.96 while shares of Starent Networks jumped 17.4% to $34.06.

Elsewhere, November Light Sweet crude oil (WTI) rose as much as $74.47 a barrel today while October gold futures rose to another record high of $1068.4 per troy ounce.

Gold rose on the back of a weakening US Dollar and elevated inflation expectations. ‘There’s lots of concern about the weakness in the US Dollar and it’s this that has been driving gold,’ explained Peter Fertig of Quantitative Commodity Research. ‘The fear that central bank exit strategies will come too late to prevent inflation is giving support to gold.’ [3]

By 3.30pm (London time) the Dow Jones Industrial Average was 34.84 points (-0.35%) below its previous close at 9850.96, while the broader S&P 500 was 5.87 points (-0.55%) lower at 1070.32. The Nasdaq fared relatively better, down by only 1.13 points (-0.07%) at 1728.50.

Finally, it’s important to note that technology bellwether Intel is scheduled to release its third-quarter earnings after the closing bell today. CSX Corp and Linear Tech will also publish their quarterly results at the end of the day.

[1], [2], [3] Source: Bloomberg News (13 October 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

US equity markets looked ready to build on last week’s strong gains following better-than-expected third-quarter earnings at Royal Philips Electronics and an improved outlook by Black & Decker.

Third-quarter earnings optimism shot through the roof again today after Royal Philips Electronics, Europe’s biggest maker of consumer electronics, unexpectedly turned a third-quarter profit of €174 million, or 19 cents a share, substantially beating Bloomberg’s median analyst forecast for a loss of €44.7 million. Earnings were a staggering 200% higher than the prior year’s comparative of €57 million.

Philips shares soared 7.13% to €18.25 in Amsterdam, while its American Depositary Receipts climbed 7.6% to $27.02 a share.

Adding to the upbeat morale was power-tools maker Black & Decker, which raised its third-quarter earnings outlook thanks to a weaker US Dollar and an improvement in sales.

The manufacturer said it expects third-quarter earnings of 91 cents a share, up from a prior forecast of 35 cents to 45 cents a share. It also expects a 23% decline in third quarter sales, marginally better than an earlier forecast for a 24% drop.

Barclays initiated coverage with an ‘overweight’ rating on Black & Decker’s shares today; the broker said the company has ‘exposure to residential new construction, which should become a tailwind again in 2010.’ [1] Not surprisingly, shares of Black & Decker rallied 7% to $50.53 this afternoon.

By 3:30pm (London time), the Dow Jones Industrial Average was 60.53 points (+0.61%) higher at 9925.47, while the broader S&P 500 was 7.68 points (+0.72%) above its previous close at 1079.17.

US banks were predominantly higher this afternoon, with Citigroup up 3% to $4.77 despite Bloomberg reporting that Citi will have to pay a $600,000 fine. According to the financial news provider, Citigroup’s fine will settle a regulator’s claims that it inadequately supervised transactions that helped international customers avoid US taxes on stock dividends.

Meanwhile, shares in Bank of America climbed 0.60% to $17.60 and Wells Fargo edged 0.2% higher to $29.28.

Asset manager Blackstone advanced 8% to $16.05 on reports that the company is planning to sell up to 8 of its portfolio companies. The sales could be made via initial public offerings.

Elsewhere, shares of energy giant Exxon Mobil climbed 1.36% to $70.21, after the price of November crude oil climbed 2% to $73.25 a barrel. The Wall Street Journal also reported that oil and gas explorer CNOOC is in talks over a possible $4 billion rival bid against Exxon Mobil for a stake in a new oil discovery off West Africa.

Shares of Novellus Systems advanced 2.9% to $21.85 after it was picked as a ‘speculative buy’ by CNBC’s ‘Mad Money’ television show host Jim Cramer. Mr Cramer believes that the maker of semiconductor equipment stands to benefit from a rebound of the semiconductor market.

Polaris, the biggest US maker of snowmobiles and all-terrain vehicles, rose 3.5% to $43.80 after being upgraded from ‘hold’ to ‘buy’ at Citigroup, which cited ‘modestly’ improving sales. [2]

Biotechnology company Amgen also benefited from an update. Its shares rose 1% to $60.04 after UBS upped its rating on the company from ‘neutral to ‘buy’. It also lifted Amgen’s price target from $63 to $70 a share.

‘The pending approval and launch of denosumab should serve as a catalyst for (Amgen’s) shares, as we view this as the highest profile product launch in biotechnology over the next several years. In our model, we estimate total worldwide denosumab revenues will climb to $2.5 billion by 2013,’ the broker said. [3]

Defence company Oshkosh Corp. was also in the limelight, after announcing that it was awarded a $408.4 million contract for 923 additional blast-proof trucks. [4] Its shares gained 1.6% to $34.11

A report on Barron’s newspaper suggests buying healthcare stocks, as analysts see it as the best time to buy into the sector since the early 1990’s. The paper also flags up how Legget & Platt, the bed spring and store shelving maker, may suffer further share price declines if the economy fails to pick up as fast as the markets anticipate. It also suggests that shares in US Steel could also be vulnerable to falls ahead if US industrial output fails to rebound.

[1], [2], [4] Source: Bloomberg News (12 October 2009)
[3] Source: Market Watch (12 October 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

US equity markets started the trading day in positive territory following a number of upbeat reports.

There was a confluence of reports that helped Wall Street higher at its open today. At first we had better-than-expected weekly jobless claims figures followed by a drop in wholesale inventories.

Then we saw Alcoa and PepsiCo deliver third-quarter earnings that were ahead of consensus expectations. Rising metal prices also gave investors an excuse to continue buying into equities today.

By 3:30pm (London time), the Dow Jones Industrial Average was 55.62 points (+0.57%) higher at 9781.20, while the broader S&P 500 was 7.17 points (+0.68%) above its previous close at 1064.75.

Investors cheered after US macroeconomic data continued to provide the market with evidence of a recovery today.

The US Labour Department unveiled a bigger-than-expected 33,000 drop in the number of Americans claiming first-time jobless benefits (initial jobless claims) over the week ending October 3.

This brought the tally down to 521,000, a 10-month low. In the meantime, the total number of Americans claiming unemployment benefits for more than a week (continuing jobless claims) slumped by 72,000 to 6.04 million.

US wholesale inventories were also encouraging, dropping for a 12th consecutive month in August; inventories at wholesalers decreased 1.3% following a revised 1.6% drop the month before. Bloomberg expected inventories to drop by only 1%. This report may suggest that orders have picked up on the back of increased sales.

Steel giant ArcelorMittal climbed 3.4% to $25.56 this afternoon and Century Aluminium surged 9.8% to $10.61 after Alcoa, the largest US aluminium producer, kicked off the US third-quarter earnings season with an unexpected profit, thanks to aggressive cost cutting and higher aluminium prices.

The company, which posted losses in the previous three quarters, unveiled a profit equivalent to 4 cents a share in the third-quarter, beating Bloomberg’s median analyst estimate for a loss of 9 cents a share. Alcoa climbed 3.2% to $14.66.

Barrick Gold and Freeport McMoRan Copper & Gold jumped 1.3% to $39.79 and 2.2% to $74.7 respectively after the price of October gold futures climbed for a third day to touch a new record high of $1057.1 per troy ounce.

PepsiCo added 0.9% to $61.69 after reporting a third-quarter adjusted profit of $1.08 a share, beating Bloomberg’s average analyst estimate of $1.03 a share. Its share price fell 1.5% to $60.25, nevertheless.

ABB Ltd, a global provider of power and automation technologies, added 3.9% to $20.54 percent after managing to refinance a credit line. The company was raised from ‘neutral’ to ‘buy’ at UBS, which cited ‘resilient pricing in power products.’ [1]

Across the Atlantic, the Bank of England and European Central Bank kept interest rates unchanged at 0.5% and 1% respectively, as widely anticipated. In a speech following the ECB decision, Jean Claude Trichet signalled that he does not plan to raise interest rates anytime soon.

[1] Source: Bloomberg (8 October 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

The Dow was unable to maintain yesterday’s upward trajectory when Wall Street opened for trading today. The US index had had 0.22% shaved off by 3.30pm in London, just as the third-quarter earnings season is set to kick off stateside.

Investors will be apprehensive and want to see evidence that recent gains can be supported by decent corporate earnings. Expectations are fairly positive, but the market will require proof once companies begin reporting.

The aluminium producer Alcoa, which reports its results at the end of trading today, gained 1.22% by 3.30pm in London. The company is expected to report a loss, but analysts at both Credit Suisse and Deutsche Bank today suggested it was a good buy at current levels.

Coca-Cola was up 1.23%, also on the back of a Deutsche Bank upgrade; the investment bank raised it to ‘buy’.

The other major gainer today was Bank of America, up 1.12% in early trading. The bank, which looks ready to replace outgoing CEO Ken Lewis imminently, seems set to benefit in the medium term from increased activity in capital markets, as well as more mortgage and credit card applications.

At the other end of the leader board, AT&T lost 3%. The company announced that it would allow voice calls on Apple’s iPhone, potentially opening the gateway for services such as Skype.

Boeing was also down in early trading, dropping 1.66% as it announced that it would delay the first flight and delivery of its 747-8 freighter, blaming high production costs and unfavourable market conditions.

Oil prices dipped slightly ahead of the weekly inventories data from the US, with Brent Crude trading at around $68.6 per barrel. While a surprise drop in inventories bumped the price last week, analyst expectations are once again for an increase this week.

Gold prices furthered their record-breaking rally today, hitting an intraday high of $1,050 per ounce and stretching to a 19.3% gain for the year. The catalyst for the strong performance seems to be continued weakness for the Dollar, as analyst speculation today cast doubt on the long-term role of the currency in worldwide oil trading.

Another under-pressure currency was Sterling which, according to the central bank’s trade-weighted Sterling index, reached its lowest level since April. The Pound was hit by a report on corporate profitability from the Office for National Statistics showing a serious decline, particularly for the manufacturing sector. Oil and gas companies’ rate of profitability was halved to 33.6% from 72.4% a year ago.

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Stock markets were absolutely buzzing today, with London’s FTSE 100 jumping more than 2% this afternoon and Wall Street up 1% during the first half hour of the US trading session.

Stocks were buoyed by a confluence of rising metal prices, deal news, bullish broker reports and optimism over the forthcoming third-quarter earnings season.

October Gold futures broke a new record high, rising 2.7% to $1045 an ounce this afternoon after the US Dollar’s role in global oil trading came under scrutiny following a report in the UK’s Independent newspaper.

The newspaper revealed that Gulf Arab states, along with China, Russia, Japan and France, are planning to put an end to Dollar-based trading in the oil market. The report suggests that the new basket of currencies may comprise of the Yen, the Yuan, the Euro and Gold.

Gold remained supported even after Saudi and Russian authorities denied the media reports, suggesting the market is still very bullish on the commodity. Analysts at Heritage West Futures told Bloomberg Television they believe the metal is likely to rise above $1,200 an ounce by year-end.

December silver futures jumped 4.5% to $17.29 an ounce, October platinum climbed 1.34% to $1312 an ounce while copper for three-month delivery rose much as 2.4% to $6,060 a ton on the London Metal Exchange.

US mining companies were, not surprisingly, having a strong run this afternoon, with the likes of Freeport-McMoRan Copper & Gold climbing 3.9% to $69.92, Barrick Gold 5.5% higher at $38.95 and Alcoa, which releases its third-quarter earnings tomorrow, up 3.65% to $13.91 a share.

‘We are all very focused on the earnings season,’ Mark Bronzo of Security Global Investors. ‘The markets are doing better as people anticipate earnings will be better than what’s expected. Basic-materials and industrials and select technology names are probably the places to be in the short-term.’ [1]

By 3:30pm (London time) the Dow Jones Industrial Average was 111.7 points (+1.16%) higher at 9711.45 while the broader S&P 500 was 13.67 points (+1.31%) above its previous close at 1054.13. The Nasdaq was also in positive territory as well, up 26.43 points (+1.6%) to 1702.07.

Semiconductors shares were in demand this afternoon, with the likes of Intel and Advanced Micro Devices advancing 2% to $19.49 and 2.9% to $5.7 respectively. Following an upbeat report on the sector with research compiled by Gartner revealing that global semiconductor revenue is likely to grow by 10% next year following two years of falls. The research firm believes that demand for new computers and feature-jammed smart phones will help boost chip revenues. [2]

Technology company Corning rose 6% to $15.70 after UBA upgraded the company from ‘neutral’ to ‘buy’, citing ‘more robust’ sales in China. [3]

Banks were also in vogue, with Citigroup up 1.3% to $4.73 and Bank of America 1.5% higher at $17.21. Goldman Sachs gained 1.1% to $188.57 after the Wall Street Journal reported that the company is currently amending the terms of a $3 billion loan to CIT Group. In the meantime, CIT Group gained 5.4% to $1.18. Meanwhile, embattled insurer American International Group surged nearly 7.5% to $45.92 this afternoon on speculation that it is near to an agreement to sell its Taiwan life insurance unit to Primus Financial Holdings.

[1] Source: Bloomberg News (6 October 2009)
[2] Source: Reuters News (6 October 2009)
[3] Source: Bloomberg News (6 October 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

US stocks opened modestly higher, snapping a four-day losing streak, as upbeat broker reports on the US banking sector and better-than-expected ISM non-manufacturing data lifted market morale.

US banks were in demand today, after Goldman Sachs upped its rating on several large US banks from ‘neutral’ to ‘attractive’.

The broker said that improved earnings, stronger balance sheets and bigger assets following a year’s acquisitions makes some of the big US banks appear relatively more attractive than smaller regional banks.

‘We believe this difference in earnings power hasn’t been fully reflected in share prices,’ Goldman reported today. ‘We estimate that normalized earnings for large banks are 39% higher than in 2007 despite the 36% decline in share prices.’ [1]

Goldman also upgraded Wells Fargo to ‘buy’ and added Capital One Financial to its ‘conviction buy’ list today. The broker said that Wells Fargo was ‘the big winner’ in tangible assets and predicted that Capital One will benefit from stronger consumer spending once unemployment growth slows.

Not surprisingly, shares of Wells Fargo advanced 5.9% to $27.82, while Capital One’s shares jumped 5.6% to $35.05. In the meantime, JPMorgan Chase and Bank of America gained 2.6% to $42.94 and 2.8% to $16.80, respectively.

Meanwhile, the Wall Street Journal suggests that Bank of America is planning to announce an emergency chief executive officer this week, if legal issues are to oust Ken Lewis before the year end. In addition, Reuters has reported that Goldman Sachs may lose out on a $1 billion payment if CIT Group were to file for Chapter 11 bankruptcy protection.

Citigroup’s shares rose 2.9% to $4.65 after Emerging Markets magazine reported that Prince Alwaleed bin Talal, a big investor in the bank, urged the US government to dispose of its stake in Citigroup as early as this year, in order to boost investor confidence.

Elsewhere, shares of Prudential Financial jumped 4.2% to $48.66 this afternoon, after Bloomberg News reported that the second-biggest US life insurer is mulling over the sale of its brokerage and fund management businesses in South Korea.

Also boding well for market sentiment today was the Institute for Supply Management‘s non-manufacturing index, which came in at 50.9 last month from 48.4 in August. This suggests the country’s services sector has started to expand.

By 3.30pm (London time), the Dow Jones Industrial Average was up by 29.32 points (+0.31%) to 9516.99, while the broader S&P 500 was 6.19 points (+0.60%) above its previous close at 1031.40. The Nadsaq was also in positive terrain, up 5.86 points (+0.35%) to 1668.35.

Brocade Communications Systems was in the limelight today, after the Wall Street Journal reported that the data storage equipment maker has put itself for sale. Brocade’s share price soared a staggering 19% to $9.10 following this news. The paper also said Oracle Corp and Hewlett-Packard were potential bidders for the company.

Yum Brands gained 4.4% to $34.6 today, after Credit Suisse told financial news provider Barron’s that the company should be trading at a premium to its rivals and that its share price could increase to $41 a share. That leaves a potential upside of 18%. The paper also flagged Avi Biopharma, stating that its muscular dystrophy drug, if successful, could send Avi’s shares soaring. Avi’s share price jumped 25% to $1.95.

Barron’s also said that continued growth in coal use across the globe could support Peabody Energy. It additionally suggests that Peabody’s shares could even double in the next few years. Peabody Energy climbed 2.7% to $36.19.

[1] Source: Bloomberg News (05 October 2009)

By Anthony Grech, Research Analyst, IG Index.

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Stock markets were struck by a heavy bout of panic selling this afternoon, after US non-farm payrolls came in substantially worse than anticipated.

A Labour Department report showing US employers shed a more-than-expected 263,000 jobs in September dealt a devastating blow to stock market confidence today, knocking the Dow and S&P 500 down by nearly 1% during the first half hour of trading. The FTSE 100 also breached the 5000 level for the first time in more than two weeks.

In the meantime, the VIX volatility index climbed 4.2% to 29.47, and gold, which tends to attract buyers for its safe-haven qualities, relinquished earlier losses and climbed back up the $1000 an ounce level.

The drop in non-farm payrolls exceeded Bloomberg’s median estimates of a decline of 175,000 by 50% and took the US unemployment rate up to a 26-year high of 9.8% in September from 9.7% the month before. In total, September’s losses bring total jobs lost since the recession began in December 2007 to 7.2 million, that’s the biggest drop since the Great Depression.

Today’s non-farm report indicates the US economy is still faced with a serious macroeconomic issue, which may risk getting out hand – companies keep making redundancies to meet profit targets and to keep the market happy but doing so also comes at the cost of weaker consumer spending. Consequently, without healthy (sustainable) levels of spending, corporate revenues are likely to come under pressure and, eventually, when there’s no more meat to eat into, so will earnings.

US factory orders were also a disappointment, coming in 0.8% lower in August following a 1.3% gain the month before.

Much of the losses seen at the start of trading were beginning to narrow, with the Dow Jones Industrial Average down by only 22.97 points (-0.24%) to 9486.31, and the broader S&P 500 only 2.13 points (-0.21%) below its previous close at 1027.72, by 3:30pm (London time). The Nasdaq, meanwhile, managed to buck the trend and rise 7.41 points (+0.44%) to 1673.82, as a raft of broker upgrades encouraged investors to continue buying technology companies.

Apple was among the hot technology stocks today, up 2.2% to 184.46, after UBS upgraded the its stock from ‘neutral’ to ‘buy’, citing ‘higher iPhone expectations.’ Intel also benefited from an upgrade from Oppenheimer, which upped its rating on Intel’s stock from ‘market perform’ to ‘outperform’. In addition, DreamWorks Animation jumped 1.8% to $34.97 after Goldman Sachs added the company to its ‘conviction buy’ list. [1]

In contrast, some financials were back in negative territory, with Citigroup down 1.2% to $4.48, Wells Fargo 0.5% lower at $26.45 and PNC Financial 2.4% below its previous close at $45.22 after Keefe, Bruyette & Woods downgraded the US bank to ‘underperform.’ The broker raised its rating on BB&T US Bancorp to ‘outperform’, however. BB&T gained 5.3% to $26.88 and US Bancorp rose 1.9% to $21.51.

Elsewhere, Edge Petroleum tumbled 73% to $0.145 a share after filing for Chapter 11 bankruptcy protection.

Airline companies were also under pressure today after the European Union filed an antitrust complaint to AMR’s American Airlines, British Airways and Iberia over the carriers’ proposed trans-Atlantic alliance.

[1] Source: Bloomberg News (02 October 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.