Markets continue to be spooked by the Eurozone debt crisis, as Italian yields stick close to 'bailout territory' despite the formation of a new cabinet, while Spanish yields also rise ahead of this week's elections.
By 3.30pm (London time), the Dow Jones was down 0.94% at 11,982.34, while the S&P 500 dropped 0.83% to 1247.37. In London, the FTSE 100 was 0.44% lower at 5493.34.
No good news from Europe
I hope no-one's getting bored of the Eurozone crisis, because it's going to continue for some time yet. In Italy, Mario Monti has finally appointed a cabinet of technocrats, acting as both prime minister and finance minister.
The main political parties opted not to take posts in the new cabinet, unlike in Greece, perhaps on the basis that they will thereby avoid any flak for the hard decisions taken by the caretaker government.
However, the news has not provided any relief for Italian benchmark bond yields, which hover just below the 7% level, while those for Spain keep on edging up and are now at 6.38%. With elections in Spain taking place later this week, spread betting investors are understandably nervous that the commitment to austerity in Madrid may be wavering.
In related news, Chancellor Merkel of Germany has said that the Eurozone’s economic powerhouse is prepared to cede some of its sovereignty in order to strengthen the wider Eurozone area.
However, any positive feeling arising from this comment, made during a summit meeting with Irish Prime Minister Enda Kenny (one of four Eurozone leaders whose fate rests in Berlin) was dispelled when Ms Merkel added that she remained opposed to the ECB taking a far greater role in solving the crisis.
And herein lies the problem; Germany is the main driver of European growth, and will suffer if that growth falters, but they appear to be simultaneously unwilling to countenance monetary support for embattled Eurozone countries. Until Germany realises this, the crisis is likely to go unresolved.
ICAP and Game Group see shares fall
Inter-dealer broker ICAP tried to strike an optimistic tone in its latest update, but the effort seemed to ring hollow.
The company said that it still expected full-year pre-tax profit would be within the expected range of market forecasts, but added that this would only come to pass if markets normalise during the final quarter.
Current forecasts for pre-tax profit are in the range of £358 million to £390 million. The news prompted investors to cut back on their holdings, and the shares fell 4% to 352.3p.
ICAP shares might be under pressure today, but the fall is as nothing when compared to the slump in Game Group shares. The video games retailer suffered a 38% drop in its share price, to 11.8p, as the significant downtrend in the share price continued.
Game Group shares were 70p each back in January, so the share price is down just over 83% for 2011. The company issued a warning that revenues for 2011 would be worse than predicted in September, with like-for-like sales 'growth' being 'no better than -7%'. Margins will also fall 150 basis points, although some cost savings might scrape together around £10 million.
The company is suffering along with the rest of the UK high street, as consumers reduce spending in these uncertain times and also look to pay down debt rather than engaging in additional spending.
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'FTSE 100 Spread Betting Market Lower as Spanish Bond Yields Rise', Article by IG Index, last update: 16-Nov-11
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