Posted on | July 5, 2012 | No Comments
European Spread Betting Markets
While the easing of monetary policy by the ECB and the Bank of England today was pretty much expected, the surprise decision by the People’s Bank of China to cuts its deposit and lending rates was not.
This briefly saw shares spread betting market prices jump sharply higher, however, the sugar rush effect proved to be ever so fleeting.
The actions of the PBOC were all the more surprising given that they were quite aggressive; however, all they served in doing was reinforcing market concerns about the strength of the Chinese economy.
Comments from ECB President Mario Draghi that risks to the euro area economy were tilted to the downside were also not received particularly positively.
The biggest mover today has been engineering company GKN after the company announced it acquisition of Volvo’s aerospace division, Volvo Aero for £633m.
Investors cheered the deal due to the lower than expected price and the move into the fast growing civil aerospace market.
Mining giant Xstrata is also making good gains after announcing the postponement of its shareholder vote on the Glencore merger. A sharp move higher in commodity prices is also helping buoy the mining sector as well.
The banking sector continues to be weighed down by uncertainty surrounding the LIBOR scandal while Moody’s and Standard and Poor’s also put Barclays on negative watch given the vacuum at the top of the business. Royal Bank of Scotland is also lower.
Other laggards include British Airways owner International Consolidated Airlines as oil prices jumped sharply, with Brent prices back above $100.
US Spread Betting Markets
US spread betting markets returned from their Independence Day break to markets struggling to build on the gains of earlier this week and opening lower despite better than expected weekly jobless claims and a June ADP payrolls report.
It could be case of the law of diminishing returns as investors realise that irrespective of what central banks do, company earnings need to reflect the economic environment they operate in.
US weekly jobless claims fell to 374k from 388k, while the ADP employment report showed a net gain of 176k, well above expectations of 100k.
Services ISM came in slightly weaker at 52.1 below expectations of 53 which means the focus will now turn to tomorrow’s monthly payrolls report for additional evidence that today’s ADP number is not an outlier.
Stocks in focus include Apple after the company suffered a setback on a court ruling that HTC devices do not infringe Apple’s patents.
Limited Brands also announced much better than expected same store sales for June.
Troubled electrical retailer Best Buy is looking at revamping its strategy with respect to its smaller stores.
FX Spread Betting Markets
In FX spread betting, the single currency took a nosedive today, hitting its lowest levels in over a month.
This comes amid the surprise decision by the central bank to slash its deposit rate from 0.25% to zero in an attempt to move capital into the real economy to try and kick start a recovery in the Europe.
Comments by Draghi about risks to the European economy saw Spanish bond yields start rising again despite a successful auction earlier this morning. The euro also slipped to record lows against the Australian dollar.
The US dollar has surged on the back of the combination of easing measures in Europe and Asia, also helped by the better than expected jobs report.
The pound has slipped against the US dollar but gained against the single currency, given that the ECB surprised many by going further on the rate front than anticipated.
The Bank of England pretty much came in on expectations so there was nothing in it to surprise the markets.
Commodities Spread Betting Markets
A combination of further monetary easing from the ECB, the Bank of England and the unexpected intervention of the People’s Bank of China, has helped send Brent prices sharply higher.
Concerns about supply due to the Norwegian output strike have also helped underpin prices.
US prices have also rebounded helped in no small part by the positive jobs data from ADP and the weekly jobless claims.
Despite or indeed because of the PBOC rate cut, copper prices have dipped on the stronger dollar, possibly exhibiting that next week’s release of second quarter GDP from China will be notably weaker.
Gold prices have slipped back against the US dollar, with the $1600 level still supporting price action; however they have gained against the single currency on the back of the easing measures.
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Spread Betting, FX and CFD comments by Michael Hewson, Market Analyst, CMC Markets.
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