Commodities Spread Betting: Gold Futures Rebound After Sharp Losses
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Spread Betting 1 May 2012
Sell in May and go away? Not yet it would seem, as yesterday's sell off was one day too early for us claim that this age-old adage is playing out.
May is historically a mixed month for the UK 100, with half of the last eighteen years seeing gains and the other half seeing losses. In both cases the average move is just over 3%.
Continental European indices are closed for their May bank holiday so volumes are likely to be thinner than normal. As a result, it is hard to see there being any significant move in either direction for the London market.
Even though European woes continue, with Spain dipping back into recession and Greece seeing weak retail sales, the stock market indices have held up pretty well.
So far the bond spread betting markets are yet to really attack Spain as they have done in the past. And they have certainly not pushed Spanish yields higher in the same way that they did for Ireland, Greece and Portugal ahead of their bailouts.
It seems a little odd that this is still the case, as the general consensus seems to be that Spain is teetering on a knife edge.
The country is attempting to implement austerity measures that will do little to bring down their ridiculously high unemployment or spur growth.
At a time when street protests are growing, the new recession will make the government's task of cutting the budget deficit even harder.
To add to European concerns, most commentators seem to think that Greece will either need to have its debt restructured again or will ultimately leave the euro altogether.
The UK 100 is just seeing a little interest from the bulls this morning as it attempts to recoup losses from yesterday and, at the time of writing, is trading at 5750.
The index is still yet to get itself above what's proving to be strong resistance around 5800. If this break were to materialise then there could be a push higher to around the 5830/50 and 5900 levels. To the downside the major support is around 5640.
Financial Spreads' clients seem to be fairly undecided as to where the UK 100 is headed in the near-term, as they are pretty much flat overall.
Whilst the same can be said for the German DAX, US indices, which continue to defy gravity, are being heavily sold by our clients. They clearly believe that some sort of major retracement is around the corner as we are yet to see such a move.
Economic data will come in the form of manufacturing numbers from the UK and the US. Both of these figures are expected to decline but hold above the expansion level of 50.0.
The PMI data has been stronger than expected on the whole so far in 2012, which is why predictions were that the UK would narrowly avoid a double dip recession. However, according to the ONS, that's not the case and our economy continues to flat line.
With input prices stubbornly high and sterling on the up, other pressures are affecting manufacturers so the number might be lower than expected.
The EUR/USD pair closed rather flat yesterday, settling at $1.3240. This came as disappointing US economic figures were accompanied by the news that Spain has re-entered recession.
The commodities markets saw a sharp sell off in gold yesterday which left everyone wondering about a so-called 'fat finger error'.
It was serious enough that trading was halted to allow 'the market to recalibrate', according to a CME spokesperson.
For the rest of the day, the gold futures market fought its way back up and closed $1.45 higher at $1,663.88.
Growing worries regarding the European economic outlook, as Spain slipped back into recession, weighed on US crude oil prices in yesterday's morning session.
Although the US economic figures also painted a negative picture, a late rebound in the stock market helped the energy sector regain some composure.
In the end, the price of US crude oil closed only marginally down, falling $0.06 to $104.87.
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'Commodities Spread Betting: Gold Futures Rebound After Sharp Losses' edited by SD, updated 01-May-12
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