An afternoon look at the markets from David Choe, Research Analyst, IG Index.
Spread Betting News - 01 February 2012
13:30 update:
Manufacturing data released today from China, Germany and the UK provided equity markets with a much needed shot of adrenalin.
By around 1.30pm in London, the FTSE 100 index was 1.50% higher at 5767, just 33 points away from the next psychological barrier.
In the previous quarter, GDP expanded by 0.6%. This leads us to believe that further quantitative easing is on the cards.
Traders will be keeping a close eye on the blue-chip index to see whether it can breach the next resistance level of 5800.
Markets boosted by strong data
China’s manufacturing PMI unexpectedly rose from 50.3 to 50.5, confounding analysts who had expected the gauge to drop to 49.6; figures above 50 signify an expansion.
Meanwhile, figures out of Europe’s biggest economy indicated that German manufacturing had rebounded for the first the time in four months. The PMI figures for January rose from 50.9 to 51, which was more than anticipated.
Back home, the manufacturing PMI rose from an upwardly revised reading of 49.7 to 52.1, exceeding expectations for a rise to 50.
Also boding well for morale was a successful bund auction. Germany today sold more than €4billion of 10 year bunds at an average yield of 1.82%.
This, in conjunction with solid manufacturing figures from China, Germany and the UK are stimulating risk appetite today.
A string of better-than-expected earnings from blue-chip UK companies also contributed to the bounce on the FTSE 100 today.
ICAP rallied 7% to 359p after unveiling projections at the upper end of analyst expectations, while Johnson Matthey added 3% to 2113p after saying that its second-half profit should be ‘slightly ahead’ of the first.
Reasons to be cautious
Although macro data and earnings news from the US and UK has been better-than-expected, data compiled by Bloomberg shows that euro area GDP will contract by 0.5% in 2012, after growth of 1.5% last year.
Also worrying is a sharp decline in the number of Eurozone companies reporting better-than-expected earnings. According to Bloomberg, less than 50% of companies reported earnings that beat market expectations.
This, together with the ongoing tensions over the Greek debt restructuring deal and renewed concerns over Portugal’s debt may limit the FTSE’s upside potential.
US futures suggest positive start
Wall Street futures point to a positive start this afternoon, with online spread betting investors keen to get their hands on Facebook’s prospectus ahead of the IPO.
The financial spread betting market will also be keen on seeing whether US manufacturing can exceed consensus expectations.
The US ISM manufacturing data is due at 3pm (London time) and forecasts point to a rise to 54.5 from 53.9. Meanwhile, the ADP employment change was disappointing, rising by only 170,000 as opposed to expectations for a 182,000 increase.
Prior month figures were downwardly revised to 292,000 from 325,000.
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'Spread Betting Daily', Article by IG Index, last update: 1-Feb-12
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