US stocks have rebounded slightly, shrugging off employment data that came in under estimates and making gains after it emerged that European banks had borrowed less than expected from the ECB.
The ADP National Employment Report showed that non-farm private employment increased by just 13,000 from May to June 2010 on a seasonally adjusted basis. This was way below analyst estimates of around 60,000, and – when compared to the 57,000 increase in May – seems to indicate that US private sector employment is decelerating rapidly.
‘On the margin it’s not great; I wish it was a better number,’ said Michael Levine, a money manager at OppenheimerFunds Inc, ‘but I look at the next six to twelve months and it doesn’t change my view that there are still a lot of attractive stocks out there and that the economy will gain some traction.’ [1]
It seems some investors believe the crucial non-farm payroll data out tomorrow will echo the ADP numbers, and markets are understandably jittery. The Dow Jones lost 0.1% in early trading, while the wider SPX 500 was up slightly by 0.4% to 2144.48.
Financial stocks helped steady US markets however, after the Senate and House of Representatives conference committee discarded a proposed $19 billion charge for the largest US banks in order to push through a financial reform bill. Citigroup, Bank of America and Morgan Stanley all benefitted from the news, adding between 0.4% and 1%.
Investors have been concerned that the ECB’s year-long lending programme – which comes to an end tomorrow – might have serious implications for European banks who are operating in a fragile eurozone economy.
However these fears were somewhat alleviated after it was announced that the 171 banks that took up the offer had only borrowed €131.9 billion, below the anticipated €210 billion that a Reuters poll had indicated. If the amount borrowed had matched expectations, then this strong demand would have been a sure sign that the banks were still heavily reliant on the ECB for support, and cast doubt on their ability to repay the approximately half a trillion euros in emergency loans that have already been lent. As it stands, the banks have surprised the markets and look much stronger as a result. Following on from this unexpected European strength, the dollar fell 0.3% against the euro.
‘All in all it is a positive signal for the European banking system,’ said UniCredit strategist Kornelius Purps. ‘This is, in my view, why we see the reaction in the market ... some of the fear is being priced out of the fixed income universe.’ [2]
Much hinges on tomorrow’s non-farms: if they come in above expectations we could even see the FTSE and Dow Jones pushed back above the respective 5000 and 10000 watermarks, but if they’re below expectations, then even eurozone positivity will not be enough to halt a further decline.
Source: [1] Bloomberg News (30 June 2010), [2] Reuters News (30 June 2010)
IG Index
- Live Prices, Charts, Indices, Equities, Commodities, Forex and more >> read the
IG Index Review.
Remember that financial spread betting is a leveraged product and can result in losses that exceed your initial deposit. Spread betting may not be suitable for everyone, so please ensure that you fully understand the risks involved.
The above content does not constitute investment advice. Neither Online-Spread-Betting.com nor IG Index accepts any responsibility for any use that may be made of the above.
Note - Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.
'Spread Betting News 30 Jun 2010', Article by IG Index, last update: 30-Jun-10
Related articles:
Spread Betting Daily, 9-Feb-12,
The daily afternoon spread betting update featuring the key stock market indices, forex, shares and commodities markets. Daily updates focus on the spread betting markets as the UK closes and the US continues to...see: Spread Betting Daily
Spread Betting News Daily, 8-Feb-12,
The afternoon spread betting update from IG Index - a look at the spread betting markets with the UK closing and the US markets just...see: Spread Betting News Daily
Looking to improve your trading results? Get free trading tips and trading analysis as well as the latest trading offers »
Trading News.
Risk Warning:
Spread Betting carries a high level of risk
to your capital and you can lose more than your initial investment,
it may not be suitable for all investors. Ensure you only
speculate with money that you can afford to lose and that you fully
understand the risks involved and seek independent financial advice where necessary.
Disclaimer:
Online-Spread-Betting.com does not endorse the information and
analysis available on this site. It is provided purely for information
purposes and is delivered as a personal view of the writer. Under no circumstances
is the information hereon to be used or considered as, an offer to sell, or a
solicitation of any offer to buy. The website content does not constitute investment
advice and neither the individual contributor nor Online-Spread-Betting.com accepts any
responsibility for any use that may be made of the content.
* Tax Free Trading:
Tax law is subject to change. It may also differ if you pay tax in a jurisdiction outside the UK.
