Asian Stock Market Indices Suffer Losses Despite US Gains
Spread Betting 23 March 2012
There's just a little bit of nervousness starting to creep into the markets and this week has proved that the global economy is still relatively fragile.
Impressive economic data has been one of the driving factors behind the recent rally in US equities, but just recently that has been counter acted by the slowdown in China.
Yesterdays data did not help the bulls and the big fear is that we see 2012 pan out in a similar way to 2011.
The year commenced with optimism that the recovery would continue but equity markets struggled to gain traction as the European debt crisis really started to flare up which has caused another recession in Europe and negative growth for the UK.
In the US where equity markets have been the most impressive, the jobs data is proving strong, however it's yet to really translate into the corresponding growth you'd expect as a result.
On top of this, the vast amount of stimulus from central banks has indeed assisted the recovery, but with so much liquidity sloshing around and incredibly low interest rates you would expect things to be a great deal rosier.
So as this correction gathers pace, although this morning the selling is having a respite, the worry is that investors have slightly had the blinkers on and we could see 2012 turn into a bit of a 2011. Another trigger for further selling could perhaps be the next domino to fall in Europe.
Certainly Asian stock market indices have been a great deal more cautious than their European and US counterparts this week, with some suffering losses of over 2%.
Individuals and companies are continuing to deleverage. Debt is now a really bad word and so everyone is doing as much as they can to reduce their debts which is affecting investment and spending.
This is why, as mentioned already this week, George's budget gamble is that cuts in corporation tax and lifting more people out of tax will actually get businesses and people spending again.
It's a throw of the dice that we will only be settled in a year or so, so we have to wait to see whether or not the gamble has paid off.
At the open this morning the UK 100 spread betting market is trading at 5850 so just in the black.
Whilst we saw a little recovery from the lows yesterday, the theme of the past few days has definitely had a risk aversion feel about it so the question is whether this move to the downside has further to go.
So far it has not matched the little sell off of some 3.5% at the beginning of this month and if it does that would bring us down to the mid 5700s.
However, if the momentum for the bears does build and we see a bigger correction of 5% to 10% then we could be seeing downside targets of 5650 to 5350.
Over the medium term the 5700 area is quite a major support area and, considering this years retracements have been met rather quickly by buying, the feeling is that we might not see a double digit percentage correction.
The theme of the economic data this week has been US housing and we end with new home sales today.
The pace of sales is being capped by the number of new homes available for sale being at a record low and rather like in London here, the lack of property on the market is inflating prices somewhat.
On the forex spread trading markets, the recent move to the downside in risk assets has strangely led to a fall in the dollar whose recent run of form seems to have come to an end.
At the same time the euro has not exactly suffered a great deal from the sell off in equities, meaning that currency market movements this week have been slightly out of sync with what you'd expect to happen.
This morning EUR/USD is at $1.3265 and on the bid at the time of writing as it tests the days highs.
Near term support and resistance is seen at $1.3185, $1.3160, $1.3130 and $1.3280, $1.3310 respectively and for now it just seems that momentum is with the bulls for now.
Gold too has seen some pressure to the downside on the commodities spread betting markets. You would have expected the recent risk aversion and dollar weakness to boost the price of the yellow brick, but there's been no such luck for the bulls.
It seems that some investors are starting to get a little nervous about the precious metals inability to return to its highs.
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'Asian Stock Market Indices Suffer Losses Despite US Gains' edited by SD, updated 23-Mar-12
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