Equity Spread Betting Markets Fall on Failure to Confirm EU Rescue Plan
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 19 September 2011
EU politicians haven’t learnt from the pressure exerted upon them by the markets and yet another meeting between EU finance ministers passes without any coordinated action.
The equity markets had priced in a slim chance that an agreement was going to be met. However with little more than hot air coming out of Wroclaw, this morning has led to some selling.
Equity markets had probably got ahead of themselves and deep down spread betting investors must have known that nothing would come out of the meeting. It’s just yet another grandstanding opportunity by politicians to say “we really ought to do something about the eurozone debt crisis, as it’s getting rather out of hand” and then pouring themselves another cup of coffee hoping the problem will go away.
The difficulty is that the leader of the European paymaster is becoming more and more unpopular at home having lost yet another regional vote to the opposition. So Merkel at this point in time would never sanction the idea of anything that the Germans will have to pay for. This is why nothing can be done as the architects of the European dream are unwilling to put their hands in their pockets to prevent the whole project imploding.
Well, at least there’s a G20 meeting at the end of this week. They’ll definitely come to a solution to save the world this time so everything will be fine.
So the FTSE 100 spread betting market is back below 5,300 as the selling pressure takes us lower and wipes out much of the hard work from last week. The 5,400 area once again has proved to provide a good selling opportunity as this is the fourth occasion that the index has retraced from the level in almost as many weeks.
Needless to say Capital Spreads clients had been selling the index in the run up to and around the 5,400 level and rightly so. However, since the move down the profits have been taken and the FTSE 100 positions are looking rather flat at the moment.
There’s nothing in the way of economic data today so all eyes will be on developments in the eurozone which have been dominating things over the past few weeks, no, actually the past few years.
It was a decent week for the euro after world financial leaders coordinated a liquidity package to ensure banks are holding enough US dollars.
Nevertheless it seems it was just a bit of a bear market squeeze and traders have resumed normal business this week. The euro dropped over 100 pips against the dollar from last night and has only rebounded ever so slightly this morning.
From a trader’s point of view, they are jumping onto the euro bandwagon on the release of “patch-up” good news and we see small squeezes here and there. Traders are also looking at the bigger picture though, whether Greece are actually able to pay their debt in full.
Currently the euro is trading at $1.3692 against the dollar but stands below its last resistance level, which could signal further potential downside.
To state the obvious, gold has been keeping its safe-haven status amid the recent volatile markets and has consistently been trading with a negative correlation to world stock markets.
The trading session on Friday blew the previous statement out of the water and after dipping past the previous day’s lows, it then followed on to rally $60. It looks as though market participants didn’t want to leave their shorts on over the weekend and were happy to buy even with both equities and the dollar rallying.
At time of writing, the metal is continuing its rally and trading at $1,825.0.
The strength shown in the greenback and the equity markets gave mixed direction for black gold on Friday.
After failing to break the $90 level once again, the seesaw was tipped and the bears took hold of the reins, putting pressure on the US contract and sending the market plummeting, wiping out weekly gains.
And things aren’t changing this morning, with oil opening the session weakly, trading a dollar lower than Fridays close amid fresh single currency woes.
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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'Equity Spread Betting Markets Fall on Failure to Confirm EU Rescue Plan' edited by SD, updated 19-Sep-11
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