US markets opened higher, but were unable to hold on to gains, as traders and spread betting investors nervously digested each new twist in the Eurozone story emerging from the current EU summit.
By 3.45pm (London time), the Dow Jones was down 3.4 points at 11,573.61, while the S&P 500 was up barely half a point at 1210.32. In London, the FTSE 100 was down 0.96% to 5398.13.
Markets wait on Eurozone news
Today’s market has waxed and waned on news from Europe. There is a constant flow of reports and rumours emerging from the discussions going on about a solution to the Eurozone crisis.
As events currently stand, a report from the Troika has said that the second bailout plan for Greece is now no longer sufficient to keep the country afloat, while France and Germany remain as divided as ever on the issue of how to increase the financial firepower of the EFSF.
In addition, the coalition government in Germany is wavering, raising the possibility that Chancellor Merkel may not be able to give a firm commitment to any decisions made over the weekend. Meanwhile, in Athens, protestors and strikers continue to clash with police, as the Greek parliament debates the latest set of austerity measures.
US data remains as Delphic as ever
The ever-fickle Philadelphia Fed manufacturing index provided a positive surprise with a reading of 8.7 for October marking a significant change from September’s -17.5. A reading of -9.6 had been expected, and markets recovered some ground following the news.
The data offers hope that at least some parts of the US economy were in better shape in October, helping to ease fears about a renewed recession. However, initial jobless claims were slightly higher than expected, at 403,000 rather than the forecast 401,000, and the previous week’s figure was revised up as usual.
Finally, existing home sales were down 3% month-on-month in September, compared to an expected drop of 2%, showing that American consumers are still not exactly keen on moving house.
Amex holders keep spending
American Express fell 1.7% to $45.35 after reporting third-quarter figures that fell slightly short of expectations. Income was $1.24 billion, or $1.03 per share on revenues of $7.57 billion. Revenue of $7.58 billion had been forecast, although only 90 cents per share of income had been anticipated.
Card holders spent 12% more compared to last year, with 29% of holders now paying off their borrowings each month, up from 16% in 2008. Expenses were up 13%, as a result in rewards programme costs.
Debenhams plans share buyback
Retailer Debenhams rose 6.45% to 66.8p after the firm said that it had beaten expectations for its full-year performance. Total transactions were up 2.9% at £2.639 billion, while like-for-like sales rose 1.2% over the 12 months to September (although they were down 0.3% excluding VAT).
Debenhams said that it continued to gain market share, which aided in lifting pre-tax profit above expectations. Strikingly, Debenhams also announced its decision to commence a share buyback programme, something which could be seen as rather rash given the continuing weak state of UK consumer spending.
Pace releases third profit warning
Pace, the set-top box manufacturer that has already issued two profit warnings so far this year, issued a third warning as a result of floods in Thailand that have disrupted the delivery of the disk drive components used in the company’s products.
Pace said that the floods would reduce 2011 operating profit by $9.5 million, with full-year profit now likely to be below the previous guidance of $150-$170 million.
In March, Pace shares dropped 20% following news of a delayed customer order, while the shares slumped anew in May after the firm warned about supply chain disruptions arising from the Japan earthquake. The shares were down 13% this afternoon, at 80.1p, from a high of 229p this year.
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'Spread Betting Markets Fall as EU Crisis Summit Stretches On', Article by IG Index, last update: 20-Oct-11
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