US markets played catch-up with European bourses today, replicating the heavy falls that Europe and the UK suffered yesterday.
A better-than-expected reading from the US ISM non-manufacturing index failed to lift spirits, as Eurozone concerns continued to spook markets.
By 3.30pm (London time), the Dow Jones had slumped 2.5% to 10,961.75, while the S&P 500 had given up 2.4% to 1141.8. In London, the FTSE 100 managed to fare better than its European cousins, but surrendered most of its gains, up just 0.3% at 5117.88.
ISM non-manufacturing beats expectations
US markets had been set for a bleak afternoon, but they managed to briefly recover lost ground following an unexpected improvement in the non-manufacturing segment of the US economy.
Like its manufacturing counterpart last week, the ISM non-manufacturing reading for August came in at 53.3, instead of hitting 51 as forecast. However, like the manufacturing reading, the only improvement was in the peripheral elements of prices and export orders.
Core components, such as new orders and employment both fell, while respondents to the survey said that the situation was becoming more uncertain.
Tomorrow the Fed will publish its 'Beige Book' survey of the US economy, and the pattern of increasing hesitancy and nervousness among employers is likely to be reflected in this report.
German factory data worsens
The news out of the Eurozone continues to be bad, and today it was Germany's turn to get everyone worked up. German factory orders, a useful barometer of the state of the Eurozone’s economic powerhouse, fell 2.8% between June and July, compared to a 1.8% gain between May and June.
The German economics ministry was at pains to point out that large items such as aircraft and ships had made the data volatile, and stripping these out (as is done with US durable goods) would have meant that July's drop was just 0.2%. However, it added that the dynamism of incoming orders had weakened in recent months.
Spread betting markets continued to fall after the news, reflecting the long-held worry that if Germany fails to grow, then the effect on the rest of Europe could be particularly messy.
Whitbread and Betfair both on the up
The consumer environment in the UK might still be fairly bleak, but people still need their morning coffee fix and hotels to stay in, helping Whitbread with a 5% rise in like-for-like sales for the 11 weeks to 18 August.
Costa Coffee and Premier Inn both did well, but the group's restaurant chains, which include Beefeater, saw a drop of 1.6% in like-for-like sales. Still, the news pushed the shares up 7% to 1559p, helping the company to recover most of its August losses.
Betfair, the betting exchange whose shares have steadily declined since the IPO last year, staged a decent rally of around 5.5% to 662.5p, as the company said that an increase in the use of mobile betting had helped to offset falling first-quarter revenues.
Bets using smartphones jumped 94% from last year, with 7.4 million bets placed. Note that a range of spread betting companies also offer mobile trading platforms.
However, revenue still fell 7% to £80.8 million. Concerns about increased regulation of the gambling industry have played their part, but scepticism about long-term improvements in Betfair's performance remains.
FTSE reshuffle due
The quarterly FTSE reshuffle takes place tonight, with 3i and John Wood Group both set to leave the premier FTSE 100 index and return to the FTSE 250.
They are likely to be replaced by Bunzl and Ashmore, although Meggitt and Sthree are not too far behind. A good performance yesterday by Inmarsat boosted that company's chance of staying in the UK's blue-chip index.
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'Weak German Factory Orders Push Spread Betting Markets Lower', Article by IG Index, last update: 6-Sep-11
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