Share Trading

The weaker tone of the last two days has gained momentum today as European markets look set to post their worst losing sequence since the beginning of January.

Disappointing manufacturing data from China, Germany and France suggests that the recent recovery in economic activity – especially in the Northern core of Europe – could well be starting to run out of steam.

Mining stocks have borne the brunt with Randgold Resources hit hard after a military coup in Mali raised concerns that production at their mining facilities in the country could well be disrupted.

Mexican silver miner Fresnillo also slid back sharply along with mining heavyweights Xstrata, Vedanta and Antofagasta after Chinese HSBC manufacturing PMI posted a much sharper contraction than forecast, raising concerns that the Chinese economy was slowing down sharply.

UK retail sales numbers also dropped sharply knocking retail stocks back despite clothing retailer Next reporting a rise in profits for 2011, with the company’s rather gloomy outlook seeming to get more attention from investors than the headline numbers.

Elsewhere in shares spread trading, Untied Utilities bucked the negative trend after saying it was on track to deliver a good financial performance for the year. B&Q owner Kingfisher also bucked the negative trend after reporting beat forecasts with a 20% rise in profits.

US markets opened sharply lower replicating the softer tone from Europe. US weekly jobless claims continued the positive theme from the US labour market coming in at 348k below expectations of 351k, though last week’s number was revised slightly higher to 353k.

There is a quite a full reporting calendar with Nike and Accenture due to report after the market close with expectations that both companies will beat previous year’s numbers.

Nike is expected to report Q3 earnings of $1.17c a share while Accenture is expected to report Q2 earnings of $0.85c a share.

Courier company Fedex reported Q3 earnings of $1.55c a share, above expectations of $1.35c a share, but the shares slid back as the company reported concerns about future growth prospects.

Both the New Zealand and Australian dollar have dropped sharply on the back of the weaker tone from China and falling commodity prices, with the Kiwi falling the most after Q4 GDP came in well below expectations of 0.6% at 0.3%.

In forex spread trading, the single currency is also lower as a trifecta of concerns over disappointing economic data in Germany and France. Additionally, deteriorating Portuguese finances and sharply rising Spanish bond yields contrive to reignite concerns about the sustainability of the fiscal situation in Europe.

The pound has also dropped back after retail sales data in February dropped sharply in February, while January’s figure was also revised sharply lower, suggesting that the recent consumer bounce back may well have ground to a halt.

The Japanese yen has been the best performer as US 10 year bond yields drop sharply sending the US dollar lower against the Japanese currency.

Copper prices have dropped sharply today on the back of this morning’s disappointing Chinese data as well as a firmer US dollar. With higher inventories in Chinese warehouses and concerns about future demand copper prices have hit one week lows.

Oil prices have also dropped sharply on the back of this morning’s weaker than expected economic data, though in truth a report that some countries were considering a release of reserves from strategic stockpiles had already started to see it drift lower.
A firmer US dollar has seen metals prices slide back today with gold prices hitting their lowest levels since January this year, though downside could well be limited by reports of central bank buying interest.

Silver prices have also slid to their lowest levels since January on the back of the disappointing data out of China and Europe, given that demand could well drop for industrial uses.

CFDs, FX and Spread Trading are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.
 

By Micheal Hewson, Analyst, CMC Markets.

Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

This material should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument

The material is not a personal recommendation and you should seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks if you are at all unsure, as well as confirming the legal, tax and accounting characteristics and consequences of any transaction.

European spread trading markets have traded in a fairly benign fashion today albeit with a slightly softer tone, as German and UK budgets play out in Europe.

Even US existing home sales weren’t enough to lift markets out of the doldrums. The introduction of tax relief on North Sea oil would have expected to give a bit of a boost to oil producers, but no such luck there.

Retailers have been rather more buoyant on the back of some positive Q4 results from Sainsbury’s, though they could have been helped by the announcement to relax Sunday trading rules for 8 weeks during the Olympics.

Other retail bellwethers were also performing well with Marks and Spencer and Morrisons also higher.

The best performing sector has been defensive telecoms with Vodafone helped by a broker upgrade from Goldman Sachs, as well as a positive court ruling from India in a long running tax case.

Gold and silver miners Fresnillo and Randgold Resources are the better performers at the top of the leader board, helped by slightly firmer metals prices.

Banking stocks have slid back as the Chancellor announced an increase in the bank levy to 0.105%, while Aviva and Standard Life are also down after going ex-dividend.

US markets opened slightly higher this morning in the absence of any real direction in European markets though they have drifted into negative territory with the banks helping the slide.

Upside momentum has been somewhat tempered by disappointing existing home sales for February which slid back 0.9%, below expectations of a 0.9% gain. Unsold inventories remain at fairly elevated levels.

With the UK budget taking centre stage today this morning’s February public finance numbers were an early blow to a chancellor who was hoping that tax receipts would hold up into year end.

That proved to be a forlorn hope as spending climbed to push borrowing to a February record of £15bn. This miss suggests that any leeway the Chancellor may have made with respect to this year’s borrowing target has now gone.

Some good news was the lifting of this year’s growth projection by 0.1% to 0.8% but this was well telegraphed beforehand.

The Bank of England minutes didn’t really throw up too many surprises though the news that Posen and Miles favoured more QE did knock the pound off its early highs.

The reaction of the FX spread trading markets has been quite benign with the gilt market slightly higher and yields lower, while the pound is broadly unchanged, if a little weaker against the dollar. It was more affected by the disappointing borrowing numbers than by anything the Chancellor said.

The best performing currency has been the US dollar, after spending most of the day mixed it has started to gain ground in the afternoon session after the disappointing housing data.

The Australian and New Zealand dollar are both lower, still weighed down by a slightly softer commodities sector.

The single currency, like the pound had been pretty much side-lined for most of the day shrugging off concerns about rising Spanish bond yields, however, it started to slip back later in the day, after once again failing at the 1.3290 level.

The gold spread trading market is slightly firmer on the back of a slightly weaker US dollar and somewhat disappointing US housing data.

Vague talk of central bank buying interest at these lower levels has also helped support prices.

Oil prices appear to be going nowhere on the one hand supported by concerns about the Middle East, but weighed down by fears that by going higher they could choke off economic growth.

Saudi Arabian assurances that they could raise output by 25% if needed to meet any supply shortfalls, has done nothing to depress prices.

Copper prices have traded sideways ahead of some manufacturing PMI data out later this week.

CFDs, FX and Spread Trading are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.
 

By Micheal Hewson, Analyst, CMC Markets.

Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

This material should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument

The material is not a personal recommendation and you should seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks if you are at all unsure, as well as confirming the legal, tax and accounting characteristics and consequences of any transaction.