Mixed Results in US Spread Betting Markets

Posted on | December 31, 2009 |

US equity markets experienced a bit of a mixed start today, as further signs of stabilisation in the embattled American labour market left investors feeling as if the Fed may decide to raise interest rates ahead of schedule.

A Labour Department report released this afternoon has showed the number of Americans claiming first-time jobless benefits (initial jobless claims) unexpectedly falling by 22,000 to 432,000 in the week ending December 26.

That was the lowest since July 2008 and substantially better than Bloomberg’s median estimates, which pointed to a rise to 460,000 from an originally reported 452,000.

In addition, the total number of people continuing to receive jobless benefits for more than a week (continuing jobless claims) dropped to 4.98 million, the lowest level since February.

A spokesman at the Labour Department explained that last jobless claims figures were ‘consistent’ with recent trends and were not influenced by any unusual factors. Even so, the week of the Christmas holiday is difficult to adjust for seasonal variations, he explained. [1]

Although the data bodes well for the American economic recovery story, it raises the prospects for a rise in short-term interest rates, which trims share valuations.

By around 3:15pm (London time) the Dow Jones Industrial Average was trading 25.54 points (-0.24%) lower at 10522.97 while the broader S&P 500 was only 1.56 points (-0.14%) below its previous close at 1124.86. The Nasdaq, meanwhile, retreated 4.21 points (-0.22%) to 1874.44.

Resource stocks were faring particularly well today, predominantly as a result of rising metal prices. It stands to reason that a robust recovery in the labour market will raise consumption for natural resources. More importantly, however, were the comments from the governor of China’s central bank, Zhou Xiaochuan, who said that China will maintain ‘moderately loose’ monetary policy in 2010. [2]

Shares in Freeport-McMoRan Copper & Gold traded 0.7% higher at $81.42 while Newmont Mining saw its share price appreciate by 0.8% to $47.98. Gold companies Barrick Gold and Gold Fields Ltd were among the sector’s best performers so far, however, up between 1% and 2%.

Banks were also en vogue, with the likes of Citigroup and Wells Fargo up by 0.6% to $3.34 and $26.98 respectively.

In contrast, Preferred Bank, an independent bank that focuses on the Chinese-American market, saw its shares tumble 20% to $1.71 on the Nasdaq this afternoon, after FBR Capital Markets downgraded it from ‘market perform’ to ‘underperform’, saying the company may need to raise money to bolster its capital. [3]

City National Corp was another laggard, marginally down by 0.1% to $45.96, despite announcing that it has repurchased $200 million of preferred shares from the US Treasury Department.

Elsewhere, Time Warner Cable was in focus this afternoon after saying that is willing to go to arbitration with News Corp’s Fox Networks in order to avoid losing some of Fox’s channels. News Corp wants to settle the issue privately, however.
Shares of Time Warner Cable were practically unchanged at $41.76 while News Corp edged 0.3% lower to $13.87.

Source: [1], [2], [3] Bloomberg News (31 December 2009)

By Anthony Grech - Reseach Analyst, IG Index.

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