Bonds Spread Betting: Italian Yields Breach Year Highs on Debt Concerns
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 7 November 2011
The financial spread betting markets commence this week with what would seem like a political deal in Greece.
The country now looks likely to receive its next bailout payment and so the focus shifts back to Italy, which was one of the hotly discussed topics of the G20 at the end of last week.
This morning our earlier opening calls have proved to be far too optimistic, having expected the FTSE to start higher by some 20 points only for it to open the session lower by about the same amount.
This has taken us to the 5500 level at the time of writing and can be blamed on rather an inauspicious start to the week by Italian government bonds.
The bonds spread betting markets have seen Italian yields break beyond their highest levels of the year, causing serious concern ahead of an important budget vote there tomorrow.
So a bout of risk aversion is getting this week underway following the volatility of last week which saw investors attempting to recoup the losses that saw October end on rather a sour note.
The market was hardly inspired by a Non Farm Payroll figure, that came in worse than expected, and the G20 summit fell flat on its face with little agreement as to how to save Europe.
That’s the bottom line and, with Greece stealing the show, it’s hardly surprising that the BRICs were jumping over themselves to pump funds into the EFSF.
As Obama himself pointed out, there are so many variables when it comes to Europe. When you think one thing has been agreed and then a national government goes and does another to save its own skin, how can that possibly inspire confidence for would be investors.
As mentioned, the FTSE is a little lower than expected on the indices spread betting markets and has been weakening even in the time that it has taken me to write this much so we are now at 5470 as the risk aversion continues.
This area we’re sitting on is a near term minor support level with 5370 and then 5320 below here being the next support levels. To the upside, which looks ambitious at the moment, 5600 and 5655 are seen as the near term resistance.
Over the longer term for the index the big question is still whether we’re in a bear market rally or we are just gearing up for the usual end of year rally. Major levels remain 4800 to the downside and 5760 to the upside.
There’s little in the way of any economic data out today but investors might watch out for EU retail sales and German industrial production this morning.
FX spread betting markets are seeing a bit of risk aversion in line with equity markets this morning as the euro gets bashed up a little bit in early trade. The dollar is proving a bit of a favourite, just as it did throughout last week.
EUR/USD is just heading back below $1.3700 at the time of writing as the government bond yields for the PIIGS edge higher.
Interestingly the battle between the euro and sterling is seeing the balance of power just tip in favour of the pound.
GBP/EUR is attempting to have another go at the €1.1700 level, just as it did last week, with the rate at €1.1665 at the time of writing. This could attract some sellers of the pound as we’ve seen sterling fail at this level a couple of times before.
The risk off trade is helping push gold higher to $1767, just off its highs of the morning. The precious metal has had a good week or so, having attracted buyers ever since dipping back towards $1600 at the end of October.
Gradually, slowly but surely the precious metal has got itself within touching distance of $1800 again.
The bulls are trying to re-establish the upward trend and seem to be making a good fist of it. Our spread betting account holders remain bullish of the metal and would no doubt dearly love a return to the all time highs.
Brent crude oil is remarkably flat considering the risk off session in equities. It’s off its highs above $113 from the Asian session which has brought it back to $112 at the time of writing, with the black stuff seemingly seeing any major moves to the upside contained.
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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'Bonds Spread Betting: Italian Yields Breach Year Highs on Debt Concerns' edited by SD, updated 07-Nov-11
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