Commodities Spread Betting: Gold Falls as US Non Farms Data Disappoints
Spread Betting 9 July 2012
Mixed messages abound within the financial markets, and we are continuing to see the FTSE 100 dither just below the 5700 level.
Bank bashing is still rife at the moment and, whilst some animosity towards them is understandable, we have to appreciate that their jobs are being made more and more difficult.
On the one hand, the banks are being continually told to recapitalise more by regulators and the likes of the IMF. These institutions fear that UK banks will suffer badly if the global economy, and particularly the Eurozone, turns ugly.
On the other hand, you have politicians and the public berating them for not lending enough to help pull the economy out of the doldrums.
The pressure of all this is getting to be quite telling, and now some of our best bankers are resigning over the Libor scandal. As this issue continues, it might not be long before other heads roll and so several senior banking executives will be very nervous.
The main problem that banks are currently facing is the struggling UK economy. And then there's the fact that the global economy is beginning to see the power houses of growth start to falter.
Why would a bank, especially one that is majority owned by the British taxpayer, want to risk its precious capital by lending to a small business or individual? In the current climate, many small businesses are unlikely to give the money back.
Unfortunately, this is exactly the kind of vicious circle that results in a recession. Reduced lending leads to a lack of confidence, which stifles business investment, and so the banks are reluctant to give more credit.
As eluded to above, it's not just the UK economy that's suffering. The global power houses of the US and China are slowing down by more than many commentators had anticipated.
Last week's Non Farm Payroll came in lower-than-expected once again and there have now been too many instances of this in 2012.
China is seeing a dip in inflation and so the old soft or hard landing argument is being batted around again. All eyes will be on China's GDP figures later this week to see just how things are going.
The FTSE 100 is currently languishing below the 5700 level. Earlier this morning we had been calling the index to open 10 points higher, however, we've gradually drifted lower and are now trading in the red at 5650.
Clients that sold around the 5700 level have been rewarded by the index's inability to get above the resistance around 5700/25. If the US stock markets are not going to spur investors into buying, then it's hard to see what else will.
On the economic data front, apart from the Chinese inflation data that we've had this morning, there's little else to report on. In fact, the rest of the week will also be relatively quiet.
The euro is continuing to suffer in the forex markets, and is approaching a fresh two year low against the dollar.
The bears will be targeting the big figure of $1.2000 and, with the way things seem to be trending for the single currency, it may not be long before we see a test of that level.
There's been very little positive news for the euro of late, and the prospect of further interest rate cuts from the ECB is only adding to the bears' argument. At the time of writing, the EUR/USD pair is at $1.2295.
In commodities trading, the gold market is suffering from a little bit of malaise after last week's worse-than-expected NFP. Whilst the result was poor, it was not bad enough to raise the prospects of more stimulus from the Fed.
Gold traders will be closely watching the release of Wednesday's FOMC minutes for any signs that more stimulus is on the cards.
The Brent crude oil market dipped back below $100 per barrel on Friday. However, it is seeing some interest this morning and it has climbed by $0.50 to $98.75.
Energy investors will be keeping an eye on the recent bounce to see whether it will break the downtrend or simply present another bearish opportunity to get short.
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'Commodities Spread Betting: Gold Falls as US Non Farms Data Disappoints' edited by SD, updated 09-Jul-12
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