Asian Financial Spread Betting Markets Fall Following the Death of Kim Jong-il
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 19 December 2011
A significant and major geopolitical event is causing a degree of uncertainty amongst financial spread betting markets this morning as Asian markets have sold off following the death of the North Korean leader Kim Jong-il.
The last thing markets want is uncertainty and this is exactly what will bring as questions are raised about who will take over and just how the regime will be led under a new leader.
For a country that has been so closed to the outside world for so long, some will see this as an opportunity for a new beginning. However, even if a new regime does become more open, it will still take many more years before the country becomes anything like its southern neighbours.
The event is a major one from a geopolitical point of view and goes to show that markets can be affected too, but the real focus remains on Europe and its debt problems.
Fitch is the ratings agency that has the daggers out for France this morning and a threat of a downgrade to them is spreading negative sentiment amongst investors.
On top of this the new ECB President has hardly given warm words of comfort over the weekend as he warned of a break-up. Bit by bit as the problems continue to rumble on, more and more of the rhetoric includes talk of a possible break-up.
The FTSE is down some 30 points at the time of writing in the mid 5300 area having been called to open even lower. For now we're suffering less of a loss than our European counterparts where the DAX and CAC are seeing slightly bigger losses.
Our spread betting account holders have been buying into this recent weakness in the FTSE, believing that there still can be the usual Christmas rally, but the downward channel that is forming doesn't look very promising for the bulls. The upper part of this channel is around 5425/50 so we'd have to see a break above here before we can be certain that Father Christmas is coming.
These few days in the run up to the festive period are historically the more bullish of the month as a whole and so any contrarian investors may well be thinking it's time to buy ahead of the year end. Any such move, whether it is higher or lower, will most likely be on the back of low volumes.
Economic data is thin on the ground today and actually remains the case for the rest of the week. A few highlights but nothing that could be expected to cause any major moves.
The negativity in equity markets is rubbing off a little on the FX spread betting world as there's a mild brush of dollar strength so far this morning.
The announcement of Kim Jong-il's death lead to a natural move higher for the US currency, but it hasn't been a massive move to the upside.
The euro continues to hold onto the $1.3000 level with EUR/USD trading at $1.3030 at the time of writing. Near term support and resistance of the pair is seen at $1.2950/1.2880 and $1.3050/3100/3160 respectively.
The gold spread betting market suffered its fair share of weakness last week as it looked like the bulls had pretty much given up on the precious metal all together.
The yellow brick has bounced quite well from the mid $1500 area and is testing $1600 again this morning following a brief visit to that level on Friday.
For many this will present a huge buying opportunity, especially if some investors hadn't been on the band wagon in recent months or years.
It's still too early to say that the gold rush is over as there are many bulls out there still calling for $2000 plus prices. In addition even though gold is itself a risk asset, many people would rather hold that than US dollars. The yellow brick is at $1596 at the time of writing.
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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'Asian Financial Spread Betting Markets Fall Following the Death of Kim Jong-il' edited by SD, updated 19-Dec-11
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