Posts from — December 2011

Financial Market Comments from Joshua Raymond, Market Strategist, City Index.
 
As the year draws to a close, City Index stock market expert Joshua Raymond summarises 2011, analysing the stock indices from a fundamental perspective and gives his thoughts on what is likely to be in store for 2012.

It has been a bearish year for the FTSE 100 spread betting market, with the benchmark UK index currently looking likely to post a 9% loss on the year after growing 22% in 2009 and 9% in 2010. The 9% fall on the year tells a tale of difficult trading conditions for investors and bearish sentiment, with investors fearful that the world is teetering back on the brink of another recession.

To put this year’s loss on the FTSE into greater perspective, the last 26 years have netted an average yearly growth in the UK’s benchmark index of 7.48%. During that time, there have only been six bearish years and interestingly enough, 2011 would actually mark the best bearish year for the FTSE 100 over the last six years.

This will inevitably beg the question, with so much still at stake in the Eurozone, is the worst yet to come? One’s likely answer to this question will be defined by whether one sits in the sceptic or optimistic camp. With spread betting, it is possible to take a position on the markets, irrespective of whether they are rising or falling.

2011 Spread Betting Dominated by Three Key Themes

Trading in 2011 has been dominated by three key themes:

1. Market shocks
2. Slowing growth
3. Eurozone debt crisis

These main market shocks have contributed to sharp equity falls and damaged longer term market sentiment: the Arab Spring Uprising, Japanese Tsunami and US Credit Rating downgrade.

The Arab Spring Uprising, typified by the revolution and toppling of the long standing rulers of Tunisia, Egypt and Libya, triggered sharp rises in the price of crude oil on global supply fears.

Nymex crude oil reached a record high of $114.83 at the start of May, and this rise applied significant pressure on stocks globally initially as traders had to come to terms with higher crude oil prices escalating business costs.

The Japanese earthquake and tsunami on March 11 triggered the first real market shock of the year, with the Japanese Nikkei falling over 1000 points before quickly recovering, and European indices following suit in similar fashion. The tsunami was devastating to both Japan and companies that relied upon produce from the region, such as car manufacturers.

In early August, the somewhat surprising cut of US’s top notch credit rating by Standard and Poor’s, after weeks of uncertainty over the raising of the US debt ceiling played a role in the biggest equity losses of the year.

From August 1 to 9, some seven trading days, the FTSE 100 lost as much as 1100 points or 19%, putting the UK index in bear market territory and hitting its lowest point in the year, 4791.

Slowing growth and the Eurozone debt crisis has also significantly impacted market sentiment this year, and these two themes are likely to play a major role in how markets progress next year.

Investors have been particularly troubled by the somewhat obvious slowdown of economic activity both in developed nations and developing economies such as China. This has raised fears that a global double dip recession could be on the cards.

At the same time, and linked to the growth issues, is the fact that the Eurozone sovereign debt crisis has put the whole Eurozone on the brink of failure.

This comes with Greece requiring new bailouts and Italy and Spain struggling to raise finance at acceptable costs in the debt markets.

The debt crisis has claimed the heads of multiple governments, with a swift change in power in Spain, Greece and Italy.

Swift change in the governments of these countries has coincided with lack of political unity and progress in Europe as a whole, with countless disagreements and public leader bashing, which culminated in the seeming isolation of the UK from the EU.

And what’s more, potential credit ratings downgrades for Europe’s top notch club has kept market rallies short lived and several unanswered questions going into 2012.

Outlook for 2012

2012 is likely to be dictated by a number of important events but three key themes, which will likely be the Eurozone sovereign debt crisis, slowing global growth and the quantitative easing global monetary policy.

Note that all of these key themes for 2012 are a mere continuation of some of the major themes of trading in 2011, and therein lies part of the problem.

DB

The above comments do not constitute investment advice and Clean Financial accepts no responsibility for any use that may be made of them.

Content provided by City Index which is Authorised and regulated by the Financial Services Authority.

In mid-morning trade the FTSE 100 spread betting market has managed to push higher as the wind-down to Christmas begins in earnest.

London has succeeded in shrugging off a weak overnight performance in Asia, as spread betting account holders take heart from the relative recovery of Wall Street last night.

Bank shares are at the forefront this morning, as financial stocks benefit from the ECB’s largesse yesterday, while BA’s parent company International Airlines is on the ascent on news that it has bought British Midland from Lufthansa.

GDP figures on the UK provided little in the way of excitement, with third-quarter growth lifted by 0.1% to 0.6%. Any nascent optimism generated by this was quickly demolished by a downward revision to the second quarter’s figure, which was cut from the Scrooge-like 0.1% growth to no growth at all.

Trading this afternoon might get a bit more interesting, given the avalanche of US data out later.

On the slate today is a revision to the US’ third-quarter GDP reading, the usual weekly jobless claims and the final December reading from the Michigan confidence index.

US futures have pushed on, with the Dow Jones expected to start around 50 points higher today, the last full day of trading before Christmas.

Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

Financial Market Comments from Ben Critchley, Sales Trader, IG Index.

The above comments do not constitute investment advice and Clean Financial accepts no responsibility for any use that may be made of them.

Content provided by IG Index which is Authorised and regulated by the Financial Services Authority. FSA Register number 114059.

Mid-morning and the FTSE has jumped higher on positive ECB news.

London started on a somewhat muted tone this morning, confounding many, in light of what appeared to be the start of the Santa rally after a stellar session on Wall Street.

The banks were perhaps the notable exception here, gaining on hopes that the global economy may stabilise in 2012, but it has been the success of the ECB’s LTRO that has finally lent equities some meaningful support.

Whether this can prove to be more than another shot in the arm for the beleaguered Eurozone patient remains to be seen, but with Wall Street already eyeing further gains at the open, this rally could find some meaningful legs.

Aside from the weekly crude oil inventories and some home sales data, there’s little of note on the US economic calendar this afternoon either.

However, assuming the Dow futures continue to point higher, and after what has by all accounts been a rather torrid year, we could at last be looking at a more upbeat run into the Christmas break.

Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

Financial Market Comments from Ben Critchley, Sales Trader, IG Index.

The above comments do not constitute investment advice and Clean Financial accepts no responsibility for any use that may be made of them.

Content provided by IG Index which is Authorised and regulated by the Financial Services Authority. FSA Register number 114059.

In early trade it has been another lacklustre start for FTSE 100 shares.

Blue-chips in London continue the drift into Christmas with the FTSE index edging a little lower this morning.

For once some of the attention is off banks and miners, with pharmaceutical firm AstraZeneca one of the heaviest hit following setbacks with a couple of its drugs, resulting in a £245 million hit in the fourth quarter.

Sector stablemate GSK is also down on the news, but with volumes and interest drying up as the week goes on there seems little appetite among investors to see this as a buying opportunity.

Looking ahead to the US open, at the moment we are expecting the Dow to start around 75 points lower this afternoon.

Like the FTSE, the Dow has spent the last week edging lower and it would take a move though 12,000 to shake off this mildly bearish sentiment at the moment.

Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

Financial Market Comments from Ben Critchley, Sales Trader, IG Index.

The above comments do not constitute investment advice and Clean Financial accepts no responsibility for any use that may be made of them.

Content provided by IG Index which is Authorised and regulated by the Financial Services Authority. FSA Register number 114059.

The FTSE 100 had a slow start to the pre-Christmas week, but has steadily enlarged its gains as the session continues.

Friday ended on a weak note as the ratings agencies conducted their traditional end-of-week downgrade for Europe, with Moody’s cutting Belgium’s rating by two notches, and Fitch essentially declaring that the Eurozone crisis was now insoluble.

In addition, Fitch placed a number of countries on negative watch, with France the most important member of the list.

Anyone hoping that we might get even the briefest respite from the Eurozone tedium in the run-up to Christmas has been disappointed; it would seem that Santa has not read the Christmas lists of any of the Eurozone’s leaders.

The death of North Korea’s president Kim Jong-Il saw some spread betting investors pause for thought this morning, as South Korea goes on alert, but the overall reaction for markets has been fairly muted.

There has been yet more carnage in the UK retail sector, as HMV revealed further falls in sales and Ocado issued a profit warning. This prompted the shares of both companies to continue their downtrend, dropping 8% and 9% respectively this morning.

It’s a quiet day for US economic data, so the focus will remain on Europe as ever. The Dow is currently expected to start around 52 points higher this afternoon.

Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

Financial Market Comments from Yusuf Heusen, Sales Trader, IG Index.

The above comments do not constitute investment advice and Clean Financial accepts no responsibility for any use that may be made of them.

Content provided by IG Index which is Authorised and regulated by the Financial Services Authority. FSA Register number 114059.