A late afternoon look at the markets from Anthony Grech, Research Analyst, IG Index.
Spread Betting News - 1 Mar 2010
4.15pm update:
March has historically proven to be a positive month for stock markets, with the S&P 500 exhibiting a 1% median monthly gain over the past five years.
Today we had upbeat comments from billionaire investor Warren Buffett, AIG deal news, waning Greek debt concerns, and a mining sector rally helping spur gains across US stock markets.
By 3.45pm (London time) the Dow Jones was trading at 10384.21, representing a 58.95 point rise (+0.57%) from Friday's close. In the meantime, the broader S+P 500 was trading 7.21 points (+0.65%) above its previous close at 1111.70.
US stock markets returned today after reputable investor Warren Buffett made upbeat remarks about the US economy, saying he believes that the US economic growth rate would accelerate substantially if policymakers adopt fundamental reforms to reduce health care costs. He also said he believes the US residential real estate slump will end next year.
Deal activity also boded well for investor morale today, with shares of American International Group (AIG) rallying 6.4% to $26.35 during the first hour of the US trading day after Prudential confirmed that it has agreed to acquire AIG's Asian life insurance unit for $35.5 billion in cash and stock.
The Greece situation also seems to be improving. According to a report by the Wall Street Journal over the weekend, Germany and France are working on a Greek bailout package worth as much as €30 billion.
Meanwhile, MarketWatch, citing a media report, has revealed that Germany may consider buying Greek bonds through state-owned bank KfW Group. The move would alleviate fears that Greece will have difficulty tapping the market for much-needed financial support, including a planned bond offering next week.
In addition, the European Union Monetary Affairs Commissioner Olli Rehn today said the EU is ready to provide support for Greece, but urged the country to immediately implement measures to shrink its bloated budget deficit.
Miners were also responsible for lifting Wall Street today, with Freeport-McMoRan Copper & Gold up 1.3% to $76.18 a share following a rally in copper futures today.
May copper futures (COMEX) climbed 6.18% to $3.487 per pound earlier today, the biggest intraday gain since April, after an earthquake of magnitude 8.8 struck Chile, the world's biggest producer of the commodity, over the weekend. This development could potentially hit global copper supplies. Also see Copper Spreads.
Elsewhere, the Commerce Department reported a bigger than expected 0.50% gain in US consumer spending for January. This was the fourth straight monthly increase and suggests that US GDP growth may accelerate in the coming months.
At first glance the spending figures appear quite encouraging, but the personal income figures were rather lacklustre. In my opinion the income figures seem to suggest that the spending may in fact weaken going forward.
According to the report, personal incomes rose 0.1% in January, behind expectations for a 0.4% increase and a 0.3% gain in December. In addition, disposable income, which is the money left on the table after accounting for taxes, declined by 0.4%, the largest decrease since July.
Consumers are not likely to continue spending more unless income growth improves, however. And the latter depends on a pickup in US job creation – will the enactment of a recent US labour market stimulus package provide the necessary boost to keep spending momentum alive?
The report also showed the personal consumption expenditures price index, excluding food and energy, rising 1.4% from a year ago in January. The index is a key inflationary gauge that is closely watched by the US Federal Reserve. The latest increase follows a 1.5% gain in December.
Meanwhile, separate data has indicated that US construction spending fell 0.6% in February and ISM manufacturing gauge dipped to a reading of 56.5. Both were lower than anticipated.
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'Spread Betting News 1 Mar 2010', Article by IG Index, last update: 1-Mar-10
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