A positive performance by the FTSE, which was momentarily propped up by a rise in banking stocks, turned out to be short-lived for UK markets today.

Renewed fears of global debt outweighed the positive performance made by banks.

UK markets remained mostly negative after credit ratings agency Standard and Poor’s reduced its rating for Spain from stable to negative.

In a report on the Guardian website, the ratings agency said that ‘Spain faced a deeper deterioration in public finances and a longer period of weakness than it had expected in January.’

Yesterday, ratings agency Fitch had downgraded Greek debt to BBB plus with a negative outlook, marking the first time in 10 years that the country has been given a score below A by a leading rating agency.

Not surprisingly, the reports impacted Wall Street negatively, driving the Dow down 22.9 points to 10263.07 and the S&P 500 5.68 points lower at 1086.26 by 2.55pm (London time).

DuPont, United Technologies, Caterpillar, JPMorgan Chase and Intel were the worst performers on the Dow this afternoon, slipping between 0.85% and 1.33%.

3M, Pfizer, Walt Disney, Chevron and Proctor & Gamble were the day’s biggest gainers, meanwhile, rising between 0.11% and 1.56%.

At home, bank stocks received an impetuous from Chancellor Alistair Darling’s pre-budget statement, which revealed that banks will have to pay a one-time tax of 50% on banker bonuses.

Investors, who had been expecting more stringent impositions on banks, reacted positively to this news, pushing banks to the top of the FTSE 100 leader board.

At 2.55pm Standard Chartered and Lloyds Banking Group were up 2.96% and 1.49% respectively, along with SEGRO, InterContinental Hotels and Carnival.

Miners were some of the worst performers on the other hand, with Fresnillo, Kazakhmys and Vedanta all down between 2.83% and 3.54% today.

Overall the blue-chip index was down too, falling by 30.63 points (0.59%) to 5192.5. The FTSE 250 was down a more significant 111.24 points (1.23%) to 8920.52.

In economic news, a report released earlier this morning revealed that the UK’s deficit on trade in goods and services came in at £3.2 billion in October, compared with a revised deficit of £3.1 billion in September.

The surplus on trade in services was £3.9 billion in October, unchanged since September.

[1] Source: City AM (9 December 2009)
[2] Source: The Independent (9 December 2009)

By Anthony Grech, Research Analyst, IG Index.

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It appears as though the rally we have witnessed since March is on the brink of faltering.

There was potential for a stock market rebound today following a speech by Federal Reserve Chairman Ben Bernanke, who yesterday evening indirectly informed the market that US interest rates will remain low for a prolonged period.

But just as sentiment started to improve, a concoction of negative data and information struck the market, sending US and European stock markets tumbling between 1% and 2% this afternoon.

Risk appetite continued to receive a battering today, after Moody’s Investors Service said the deterioration of public finances in the United States and United Kingdom may ‘test the triple-A boundaries’.

They are, in other words, saying the countries risk losing their sovereign credit-ratings if policies remain as they are.

Exacerbating sentiment was Fitch Ratings decision to downgrade Greece’s credit rating from A- to BBB+ with a negative outlook, and renewed fears over Dubai World’s debt restructuring.

We were also hit with a barrage of disappointing economic data in the UK as well as Europe.

The British Retail Consortium today revealed that like-for-like sales grew by only 1.8% on the year in November, trailing Bloomberg’s expectations for a 4% annual increase.

Then a separate report from the Office for National Statistics revealed that UK industrial and manufacturing output for October remained flat on the month.

An unexpected drop in German industrial production also struck confidence. The Federal Ministry of Economics and Technology today said that industrial production in Europe’s biggest economy declined 1.8% in October, trailing Bloomberg median estimates for a 1% gain.

By around 3.35pm (London time) the Dow Jones Industrial Average was trading 90.69 points (-0.9%) lower at 10299.42, while the broader S&P 500 was knocked 8.97 points (-0.8%) below its previous close at 1094.28. In the meantime, the FTSE 100 retreated 81.22 points (-1.5%) to 5229.44.

Elsewhere, the VIX, a measure of market volatility that is colloquially referred to as ‘the fear index’, surged 5.3% to 23.27 and the US Dollar made broad gains, as investors decreased their exposure to higher yielding assets and parked funds into Treasuries.

The US Dollar rebound exerted pressure on commodity prices, with December gold and January Light Sweet crude oil both falling 1.3% to $1148.1 per ounce and $73 a barrel, respectively.

The drop in commodity prices had an inevitable impact on resource shares as well. Barrick Gold Corp, the world’s biggest producer of the precious metal, plunged 3.3% to $41.03, while Freeport-McMoRan Copper & Gold sank 2.5% to $76.7.

US corporate news didn’t help sentiment either unfortunately, with diversified manufacturing firm 3M seen 1.5% lower at $76.72, after proving a full year outlook that fell short of consensus expectations. The company was also cautious over its 2010 earnings outlook.

Shares of McDonald’s were also knocked back, after disappointing sales figures for November left the market feeling that the fast food company is not immune to slowdowns in consumer spending. McDonald’s traded 1.7% lower at $60.86.

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 managed to claw back losses seen at the start of the trading day, as gains across semiconductor shares countered weakness in resource shares.

Rate hike speculation weighed on US equity markets during the first half hour of trading, as Friday’s robust US non-farm payrolls left the market feeling as if it had underestimated the strength of the US economy.

This view encouraged the market to start factoring in a higher probability of an interest rate hike over the short to medium term, and led some investors to buy back the Dollar.

This development that is strengthening the Dollar, weakening commodity prices and weighing on resource shares.

December gold futures traded 2.3% lower at $1142 per troy ounce, while December high grade copper fell 1.6% to $3.1625 per pound this afternoon.

Meanwhile, January light sweet crude oil slid 1.2% to $74.54 a barrel.

Not surprisingly, shares of Freeport-McMoRan Copper & Gold traded 0.7% lower at 79.31, while Newmont Mining was 0.8% lower at $51.64.

Financials were mixed, with credit card company American Express rising 1.6% to $39.92, following an upgrade by Bank of America Merrill Lynch. [1]

In contrast, Citigroup fell nearly 1% to $4.08, and Bank of America retreated 0.6% to $16.18.

Semiconductor shares put on a strong performance, however, with Advanced Micro Devices and Nvdia Corp rallying 7.8% to $8.47 and 12.4% to $16.05 respectively, after Citigroup upped their price targets. [2]

By around 3.30pm (London time), the Dow Jones Industrial Average traded 37.56 points (+0.36%) higher at 10426.46, while the broader S&P 500 was 3.12 points (+0.28%) above its previous close at 1109.10. The Nasdaq, meanwhile, had advanced 3.59 points (+0.20%) to 1795.50.

Going forward, there is still quite a bit of uncertainty over the direction of US interest rates and I suggest investors keep their ears open for any comments made by the Federal Reserve chairman Ben Bernanke.

As a matter of fact, the Fed chairman is scheduled to deliver a speech today at 5pm (London time).

‘We expect volatility to continue, as investors are still concerned about what the Fed’s going to do in light of Friday’s jobs report,’ said Adam Sarhan of Sarhan Capital.

‘Are we going to continue to see stronger-than expected economic data come out? If so, that could cause the Fed to change its views.’ [3]

Source: [1] Wall Street Journal (7 December 2009)
Source: [2] Bloomberg News (7 December 2009)
Source: [3] Wall Street Journal (7 December 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.

It was a euphoric afternoon on the trading floor, with sentiment moving from fearful to fearless the second the US non-farm payroll figure hit the market.

Stock markets cheered today, after US non-farm payroll figures revealed that the American economy lost its fewest jobs in nearly two years last month.

Non-farm payrolls fell by only 11,000 in November, substantially better than expectations for a 125,000 decline. [1]

Payroll revisions showing 159,000 fewer jobs lost over October and September was also extremely encouraging: payrolls in October were revised to show an 111,000 drop instead of an initially reported 190,000 decline, while payrolls in September fell 139,000 from an previously reported drop of 219,000.

Today’s report showed the professional and business services segments adding 86,000 payrolls. Education and health services also increased payrolls by 40,000. In contrast, manufacturing payrolls fell 41,000 in November while the construction sector shed 27,000 jobs.

The US unemployment rate, meanwhile, declined to 10% in November from 10.2% the previous month. The latest reading was also better than consensus expectations, which were pointing to a flat reading.

Overall, the unexpected rebound in labour market conditions suggests that US consumer spending is likely to be stronger than anticipated, especially over the all-important festive season. This could mean that we’re likely to witness an acceleration in the US economic growth rate over the fourth quarter.

Also boding well for market sentiment was a bigger-than-expected rise in American factory orders, which rose by 0.6% in October following a revised 1.6% gain the prior month. A sharp pickup in demand for non-durable goods was responsible for the stronger gain in factory orders.

The report also showed factory inventories rising 0.4% in October, the first rise in 14 months. The increase in factory stocks suggests that factories are ramping up production, perhaps in anticipation of stronger consumer demand over the festive season.

By 3.30pm (London time) the Dow Jones Industrial Average traded 120.16 points (+1.16%) higher at 10486.31, while the broader S&P 500 was 14.66 points (+1.33%) above its previous close at 1114.58. The Nasdaq, meanwhile, climbed 27.48 points (+1.54%) to 1810.39.

The US Dollar rallied broadly higher as well today. This is something we haven’t seen in quite a while; over the past year the Dollar has had a tendency to depreciate whenever there was an increase in risk appetite and vice versa.

The relationship was created on speculation that US interest rates would remain at a low rate for a prolonged period, yet those expectations were unequivocally defied today. The stronger US data is essentially encouraging investors to buy back the Dollar in case interest rates rise ahead of expectations.

The Dollar’s rally took the shine off gold, which is also perceived as a safe-haven instrument. December gold futures tumbled 3.2% to $1179.1 per ounce.

In contrast, high grade copper, a metal used for industrial purposes, found some support from the data. By 3.30pm (London time, December high grade copper was trading around 0.1% higher at $3.222 per pound.

Crude oil also benefited from the American data, with January Light Sweet crude (WTI) futures up by nearly 1% to $77.19 a barrel.

In corporate news, Big Lots, which sells excess inventory at discounted prices, saw its shares surge 18% to $27.79 after posting third-quarter results that were above consensus estimates. The company also upped its guidance over the for the holiday season.

Sun Microsystems was also en vogue, up 2% to $8.40 after Eben Moglen, a renowned law professor at Columbia University, told European regulators holding up Oracle’s $7 billion purchase that their assessment may be flawed.

[1] Source: Expectations based on a Bloomberg survey

By Anthony Grech, Research Analyst, IG Index.

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It has been quite a volatile day so far, with Wall Street opening modestly higher after investors interpreted Bank of America’s decision to split from the US government’s grips as a sign of progress.

Market confidence was quickly crushed, however, by a dismal report showing an unexpected contraction in the US services sector last month.

The trading day kicked off quite well, with Bank of America’s share price rallying 4.3% to $16.33 after announcing that it will repay $45 billion of US government bailout funds – a move that will end a number of restrictions imposed on the bank by US regulators.

This development helped lift shares across the sector, with Citigroup seen 0.7% higher to $4.13, Wells Fargo up 1.2% to $27.78 and JPMorgan Chase 2.6% above its previous close at $43.04.

Stimulating risk appetite at the start of trading was a report showing some evidence of life returning to the embattled US labour market.

The Labour department today showed that the number of Americans claiming first-time unemployment benefits (initial jobless claims) fell 5,000 last week to 457,000. This was better than Bloomberg’s expectations for a drop to 480,000.

Meanwhile, a separate report revealed that US labour productivity, a measure of employee output per hour, improved at its fastest pace in six years during the third quarter. The gauge rose at an annual rate of 8.1%, while labour costs fell at a 2.5% pace.

‘The labour market is turning,’ said Dean Maki, chief US economist at Barclays Capital. ‘We are set to break into positive job growth over the next few months. The recovery is proceeding on schedule.’ [1]

Market confidence was struck down by an unexpected contraction in the US services sector, however. The Institute for Supply Management’s overall index of non-manufacturing activity fell to a reading of 49.6 in November from 55.2.

Readings below 50 signal a contraction. Not surprisingly, this development fuelled an immediate sell off, as it suggests that the risks of an economic relapse have increased.

By around 3:30pm (London time), the Dow Jones Industrial Average was 15.72 (-0.15%) points lower at 10436.96, while the broader S&P 500 was 3 points (-0.28%) below its previous close at 1106.18. In contrast, the Nasdaq remained afloat, up 4.6 points (+0.26%) to 1795.42.

In corporate news, Comcast, the largest US cable-television company, announced that it will form a joint venture with General Electric’s NBC Universal, with GE receiving $8 billion in cash out of the deal in which Comcast will hold a 51% stake. Comcast also reported that it was increasing its dividend by 40%.

Fitch Ratings, meanwhile affirmed its ‘BBB+’ rating for Comcast’s Issuer Default Rating (IDR) and senior unsecured debt ratings and said that the company’s rating outlook appears stable.

Comcast’s share price surged 6.8% to $15.95, while General Electric climbed 0.9% to $16.22.

In Europe, the ECB kept interest rates unchanged at 1%, as anticipated. However, the central bank’s president Jean Claude Trichet surprised the market by saying that the Euro region’s recovery may be ‘anaemic’ and that inflation will remain ‘subdued’.

Elsewhere, shares in Irish Life & Permanent surged 7.2% to €3.5 on speculation that that France’s AXA could launch a takeover bid for the bancassurer. ‘There’s a rumour that AXA may bid for Irish Life at €6. It’s purely a rumour. The volume is small,’ one Dublin-based dealer said. [2]

[1] Source: Bloomberg News (3 December 2009)
[2] Source: Reuters News (3 December 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 opened uncertainly but positively today.

The latest employment data, while an improvement, seemed to underwhelm investors and signalled the end of the short-lived diversion of the Dubai debt crisis.

In the first of three days of employment figures the ADP National Employment report concluded that 169,000 private sector jobs were lost in November.

The drop was the smallest since July 2008 but still exceeded expectations which were around 150,000 to 160,000. This eighth straight, minor, decline suggests that we should get used to the idea that the recovery process will be a long one.

The US economy has now shed a total of 7.3 million jobs since the recession began in December 2007, the biggest slump since the Great Depression.

‘The labour market is crawling towards stabilization. We need the labour market to improve to generate the wage income necessary to support spending.’ said Ryan Sweet a senior economist at Moody’s Economy.com in Pennsylvania. [1]

Of course this report only serves as the appetiser for the non-farm payroll figures out on Friday and it’ll be interesting to see how investors will react to these.

Troubled carmaker GM saw the resignation of CEO Frederick Henderson after directors concluded he hadn’t delivered the results and changes they had expected.

Ed Whitacre, chairman and now interim chief executive, said in a brief statement: ‘I have taken over the role of chairman and CEO while an international search for a new president and CEO begins immediately.’ [2]

Shares in food giant Kraft were up 1.33% at $26.71 in early trading after it disclosed that it had secured an important $4.5 billion three-year credit agreement yesterday.

Shares in Boeing were up too at $54.12 (+0.74%), as it emerged that its competing bidder for a $50 billion contract with the US Air Force, Northrop Grumman Corporation, might withdraw from the bidding process.

By 3.15pm (London time), the Dow Jones Industrial Average had risen further and was trading up 36.58 points (+0.35%) at 10508.16, while the broader S&P 500 was also up 5.83 points (+0.53%). The Nasdaq was also in positive territory, up 21.09 points (+0.97%) to 2196.90.

Investors will be looking out for when the Federal Reserve releases its latest Beige Book later today at 2pm (EST).

[1] Source: Bloomberg News (2 December)
[2] Source: Financial Times (2 December)

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 made decent gains at the start of trading today as concerns over Dubai World’s debt problems receded.

Robust Chinese manufacturing data was also responsible for today’s strong start.

It seems as though the recent bout of profit-taking opened a window of opportunity for cash-hungry investors who were waiting on the sidelines.

Risk appetite flourished again today, after Dubai World announced that it has begun ‘constructive’ talks with lenders to restructure $26 billion (£15.7 billion) worth of debt. It also said that remaining liabilities are stable.

The market appears to be feeling more confident since the debt problem is appearing more manageable and containable.

‘The fallout from the Dubai situation and the overall contagion effect should be both short-lived and quite limited,’ wrote Suki Mann, a credit strategist at Societe Generale. ‘We are close to the end of a remarkable year for risky assets, and this is probably the last chance for fast money to make a quick turn.’ [1]

With Dubai no longer seen as a threat to the global economic recovery, the markets are once again focusing on the fundamental economic environment, with morale buoyed by some encouraging data from China and the US.

Investors cheered today after a survey released by HSBC indicated that China’s dominant manufacturing sector expanded at its fastest pace in five years last month.

Meanwhile, a separate report revealed that pending US home sales unexpectedly jumped 3.7% in October. Furthermore, the Institute of Supply Management’s manufacturing index showed that the US manufacturing sector expanded for a fourth consecutive month in November.

The ISM manufacturing Index fell to a reading of 53.6 in November from the prior month’s three-year high of 55.7. Readings below 50 signal a contraction.

‘This dip down is more of a mid-course correction rather than a sign the boom is over,’ said Ethan Harris of BofA Merrill Lynch Global Research. October was ‘a little too strong relative to other information on the economy, which generally looks like a very moderate recovery.’ [2]

By 3.30pm (London time) the Dow Jones Industrial Average was trading 105.58 points (+1.02%) above its previous close at 10450.42 while the broader S&P 500 Index was 11.22 points (+1.02%) higher at 1106.85. The Nasdaq, meanwhile, gained 21.08 points (+1.2%) to 1788.51.

The VIX, a gauge of stock market volatility, and often referred to as the ‘fear index’, tumbled 7.2% to a reading of 22.75. In turn, heightened levels of risk appetite weighed on the US Dollar, which helped drive commodity prices higher.

December gold managed to climb to a new record $1199.3 per troy ounce today as investors bought the precious metal to hedge against prospective US Dollar declines.

The weaker Dollar also helped January crude oil futures (WTI) advance 2% to $78.85 a barrel and January Brent crude rise 1.8% to $79.89 a barrel.

Not surprisingly, US miners rebounded today, with Freeport-McMoRan Copper & Gold trading 1.8% higher at $84.26 and Newmont Mining up 3.4% to $55.46. In the meantime, energy major Chevron gained 1.4% to $79.11, while Exxon edged 0.7% higher to $75.61.

Financials were also in recovery mode following yesterday’s sell-off, with shares in Fifth Third Bancorp and BB&T Corp up 0.45% to $10.12 and 1.3% to $25.23 respectively, after Citigroup upped them to a ‘buy’ recommendation. [3]

Insurer American International Group surged 11.3% to $31.61 a share, meanwhile, after announcing that it has reduced the debt owed to the Federal Reserve Bank of New York by $25 billion.

Elsewhere, office products firm Staples saw its shares jump 5.8% to $24.67 after unveiling third-quarter earnings and revenues that were ahead of expectations. The company’s fourth-quarter outlook was also encouraging.

Automakers were also in the limelight today, with General Motors saying that vehicle sales in China jumped 109.5% in November as compared to a year ago. The motor company said it benefited from strong demand for fuel-efficient cars.

Ford Motor’s shares, meanwhile, edged 0.22% higher to $8.91 after it said sales in France grew 87% on the year in November.

[1] Source: Bloomberg News (1 December 2009)
[2] Source: Bloomberg News (1 December 2009)
[3] Source: Reuters News (1 December 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.