Financial Markets
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The regular Spread Trading Update from Simon Denham of Financial Spreads.
Spread Betting 6 February 2012
The on-going talks between Greece and the Troika continue to prevent the indices spread betting markets from making ground to even fresher highs.
Whilst the deadline for a resolution to the talks has been continually dragged through the mud, the other looming deadline of a possible default date has got closer.
Unfortunately for the Greeks they are in an impossible position of being asked to accept more and more austerity in order to bring their deficit down but killing off any prospects for growth at the same time.
The measures being imposed upon them by the very people that they rely on for their next tranche of bailout funds are choking off any prospect of growth for many years to come.
The problem is that Greece has been so uncompetitive for years, even before it joined the euro, and has had a reputation for poor tax retrieval and dishing out state funds to the bloated state sector.
Without reform this small country that is at the epicentre of the global sovereign debt crisis will find it even harder to ever return to growth. The greater the pain now, the more chance of a return to competitiveness and prospects of a better recovery into the future.
After the mega gains of last week markets are just pausing for breath at the moment as a little froth is being taken off the top this morning.
The FTSE 100 is just a few points lower, under the 5900 level that it only just closed above last week. The euphoria from the Non Farm Payroll figure which sent the markets skywards on Friday just seems to have died out as the focus goes back onto Greece.
Things are very quiet today on the economic data front as German industrial orders later this morning will be only thing worth keeping half an eye on. The number is due to rise, but won’t be enough to prevent a quarterly decline for Q4 of last year.
The result of last Friday’s NFP figure gave the dollar a short lived rally, as traders suspected the increase in jobs would encourage the Fed to ease its monetary policy. This morning the focus is back to the Eurozone and Greece again attempting to reach an agreement with their creditors.
In line with equities, the forex spread betting markets are risk-off and the single currency is down against the dollar to $1.3060. Until we see some optimism with regard to the Greek debt situation, the uncertainty may provide for further falls in the euro.
The euro’s weakness this morning is affecting its relationship with sterling too as the GBP/EUR spread betting market continues to hold onto the €1.2000 level, with the pair at €1.2062 at the time of writing.
Regularly in the past sterling has lost momentum against the single currency around this area, but not seemingly this time. Pressure continues to build against the euro as, for some reason, a few currency traders seem to find sterling a slightly safer haven than the euro.
After the surprisingly better than expected US NFP figure, investors started banking their profits in gold and reinvesting into riskier assets, happy to ride the wave of optimism that was engulfing the markets.
Consequently, the precious metal lost $33.2, bringing it down to $1725.8 meaning that the week’s gains were wiped off and thus changing the outlook to neutral.
At time of writing, the yellow brick trades down further still at $1724.9, in line with weaker equity markets and since the break below some near term technical levels, a few of the bulls are having their nerve tested.
The pessimistic views relating to the energy sector that had been rife in the markets were soon reversed on Friday after the US employment data came out.
The rise of 243k jobs was much higher than the expected figure of 150k, which pushed the unemployment rate lower to 8.3%, the best figure since February 2009.
This brought investors to the belief that demand will be raised and in turn, caused a hike in the price of a barrel of oil.
Brent crude oil got itself back above the $114 level but this morning it’s struggling to hold onto that ground as it trades at $114.00.
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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Spread Betting 3 February 2012
The Germans continue to kick up a fuss about the ECB's involvement in Greece's debt restructuring as they refuse to let the Eurozone's central bank take haircuts on their share of Greek bonds.
Clearly other bondholders would like to see the ECB take on its fair share of the write downs in order to try and achieve the difficult task of putting Greece back on the road to fiscal repair. However, with the Germans being the ECB's biggest share holder they are reluctant to have the central bank partake.
For them this would be the beginning of Germany opening its coffers and exposing its taxpayers to the other bailed out countries who will almost certainly want to see a similar deal where half their debt it written off. Such a move would almost certainly scupper any chances of the incumbent's of re-election.
However, the talks continue on just how much pain the PSI will take with bond write downs and just what rate of return will be given on the ludicrously long dated bonds that will replace the existing assets.
It now seems hard to see why the PSI would agree to what's on the table without the ECB taking some sort of a hit as well. As another week draws to a close the lack of agreement is frustrating investors.
At least there have been other things to focus on this week as opposed to the ongoing Greek talks with yesterday's big M&A news that Xstrata and Glencore are planning a tie up.
On top of this, the American shares market has seen the anticipated IPO of Facebook gather momentum and the debate is raging as to whether it'll be a Google type float or a flop. Until we know more about exactly what price they're looking to float at it's a tricky one to evaluate.
Advertising revenue from social media sites still remains largely untested and hasn't quite established itself yet.
The big names are yet to have ramped build big advertising campaigns for the likes of Facebook, so for now it looks like a bit of a punt on whether this potential will be realised in the next couple of years.
But with 850 million users there are plenty of attractions and many people will be eager not to miss the party when the float does happen.
So a flat start to trading today as the FTSE hovers around 5800. Only a few weeks ago many the consensus was that we were due to head lower, the technicals were looking incredibly weak and markets were going to plunge to new depths.
Almost everyone was bearish, which was the perfect signal to get long, and there were many clever people that did buy stocks in the final quarter of 2011.
Now it would seem there's a little bit too much bullishness out there as people are talking up the rally and people are pointing out the 20% recovery from the lows saying that we're back in a bull run.
It might soon be time for a move to the downside as there's a feeling sentiment might have just got a little too bullish. This is certainly what our financial spread betting clients seem to think anyway as they remain firmly in the bear camp, selling the FTSE index.
Today sees the US Non Farm Payroll number which is expected to come in at 150k.
This number has been good for the bulls over the past few months and encouragingly the rate of unemployment has dipped back below 9% to 8.5%. This is where it's expected to remain today, so all eyes on the US figure at 13.30 London time.
Last night Ben Bernanke reminded us that the US still faces many challenges to bring unemployment lower, which just kept US index gains in check.
FX markets have been rather flat on the whole and this morning EUR/USD is at $1.3150. Despite the ongoing talks between the PSI and Greece the single currency has held up pretty well.
The NFP today could provide some excitement for currency traders but for now support and resistance in EUR/USD is seen at $1.3100, $1.3020 and $1.3200 respectively.
Gold had a little move to the upside yesterday and reached new near term highs. This morning the precious metal is at $1758 a touch lower, but still very much in its short term bullish uptrend.
The bulls must be eying up the $1800 level, but the resistance at $1767 and $1790 needs to be overcome first.
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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Spread Betting 2 February 2012
Markets staged decent gains yesterday as manufacturing numbers across the board showed encouraging signs that all is not lost in the industrial sectors around the world.
It was the strength of manufacturing in the emerging economies that really got the bulls excited where India’s number hit an eight month high and China posted a decent gain.
Even in Europe, Germany and the UK saw manufacturing numbers that surprised to the upside and this overshadowed worse than expected employment numbers from the US. The positive data pushed the likes of the DAX 30 to new highs of the year and the FTSE a step closer to its 2012 highs.
Whilst manufacturing in the UK only makes up some ten percent of the economy, in the emerging economies it is a much bigger component and these are the ones that count as far as global growth is concerned.
The West is heavily reliant on the power houses of India and China to buy what little we export to them and they in turn are reliant on us buying the goods that they make as well.
There’s always a flip side to any good piece of data though and for the likes of the UK and Germany the question is whether this uptick in manufacturing data can actually turn into new jobs.
Confidence about growth in 2012 is still pretty anaemic and so whether this jump can be sustainable or not is another question altogether.
This morning the strength from yesterday is following into today and the FTSE is now knocking on the door of its 2012 highs, just in positive territory at 5800.
The index is being assisted by merger and acquisition news from the mining sector as coal giant Xstrata has announced that it is looking to merge with Glencore.
Now that Xstrata’s share price has finally opened it is over 10% higher in the mid £12 range and Glencore is up by over 3%. As a result, it’s hard to see this being a merger of equals as their PR divisions are currently spinning it.
Clients have been caught on the wrong side of just about everything apart from gold in the recent move higher. They remain short of most rallying markets, whether that be the FTSE, the S&P 500, the euro or even some of the soft commodities.
Many people remain convinced that the strength seen in risk assets so far this year is going to be short lived, but slowly and surely the bears seem to be becoming the minority.
The strength in equity markets and general increase in risk appetite gave a boost to the euro which didn’t make many clients particularly happy as they have been opposing the recent EUR/USD rally.
This morning the single currency is at $1.3150 against the dollar, knocking on the door of a seven week high.
The move higher since the middle of January has taken EUR/USD back above its 55 day moving average on the daily chart so the momentum seems to remain on the side of the bulls. Support and resistance is seen at $1.3045/20 and $1.3230/55 respectively.
Gold was pretty much flat on the day and couldn’t quite take on the $1750 level.
This is just about the only one of the most popularly traded markets that our spread betting clients are actually long of and so they are hoping for further strength towards $1750 and beyond.
If the risk appetite sustains itself then we could see continued strength in gold as the bulls take on resistance seen at $1760 and $1775.
Brent was also in demand yesterday in line with the equity market rally and the black gold continues to be well supported by geopolitical tensions between Iran and the West.
The improvement in manufacturing data across the board also kept the commodity in demand. This morning Brent crude oil is at $112.20 and support and resistance is seen at $111.00 and $112.80 respectively.
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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Spread Betting 1 February 2012
RBS remains in the headlines as "Mr" Fred Goodwin is stripped of his knighthood. It comes as little surprise and really probably could have come sooner with the benefit of hindsight.
His name will forever be associated with the banking crisis and as the person who shouldered the most blame for what has happened subsequently after building the bank into an institution that held assets twice the size of the UK economy.
A lot has changed since and banks have changed as regulations have become tighter and capital requirements stricter.
The world of banking has most definitely changed but unfortunately lending to the wider economy continues to be stifled.
Whilst they continue to repair their balance sheets much of the money remains either locked in their vaults or deposited with the ECB at a time when businesses are crying out for cash.
The results from the UK banks are due towards the end of this month so it will be interesting to see firstly whether RBS does make a profit and secondly how the overall sector is doing.
The 2011 numbers are on the whole expected to be down on 2010, but this doesn't seem to be stopping big bonuses being dished out.
Although there are many headline grabbing numbers, overall bonuses for bankers is down and nowadays they are paid in shares so it should theoretically be in their interests to work for the long term improvement and profitability of the bank.
A more profitable bank should theoretically mean more lending to the economy, but this is just the theory.
At the moment the reality is very different, but the optimism in shares spread betting markets could brush off on sentiment and confidence allowing banks to open their vaults and get lending going again. This will be critical to helping the economy to avoid flat to negative growth this year.
We've seen so far this week a little bounce in confidence across the Eurozone and the UK, but this maybe just a reflection of the festive period and general New Year optimism.
Whether this can be maintained is very much up to whether inflation does carry on downwards and growth doesn't flat line.
As February gets underway the market seems to be carrying on from January, getting a little bit of a boost from some Chinese manufacturing numbers overnight so at the time of writing the FTSE is back above the 5700 level.
The trading ranges so far this year have been rather narrow, but overall equity markets have had one of their best starts to a New Year and this bodes well for the remainder of the year.
Our spread betting account holders don't seem to agree as they continue to oppose any strength, in particular on the US indices which have been marching higher.
There's a bit of economic data out today that we should all pay attention to. UK manufacturing PMI numbers are expected to climb back above the 50 level which is meant to indicate expansion for the sector, so this could be good news for the bulls and in particular sterling.
Then at lunch time the prelude to Friday's Non Farm Payroll comes in the form of the private ADP payrolls from the US which are to climb almost 200k.
Later this afternoon, there are further US numbers in the form of manufacturing and construction data.
The recent strength in the euro has come to a standstill for now, in line with the equity markets that seem to have had their palpable strength put on pause.
The rally so far this year hasn't been helped by the continuing discussions on Greece's debt as day after day we are told "we're near an agreement".
For now the euro is holding onto the $1.3000 level against the dollar as EUR/USD trades at $1.3060 at the time of writing. Support is seen at $1.3045 and $1.3010 with resistance at $1.3210/30.
The gold spread betting market continues to hover around its recent highs and this morning is at $1738.
Underlying strength in the precious metal seems to be coming from both angles with the price getting support from both increased risk appetite as well as risk aversion when the euro gives back a little bit.
The bulls will be targeting $1748 and $1760 meanwhile support is seen at $1703 and $1680.
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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Spread Betting 31 January 2012
The first month of 2012 draws to an end and it’s one nil to the bulls. The month has had its ups and downs but overall a bit of a bullish slant has taken many investors by surprise.
The FTSE is looking to post a gain of over 2% in the month whereas its European counterparts have had a much stronger month; the German DAX is over 6% higher and the French CAC has risen by more than 4%.
This indicates a change in sentiment towards equities and a degree of confidence in the overall outlook for the wider economic picture. If equity investors are growing in confidence then their belief is that future prospects are brighter.
Yesterday we saw better than expected confidence numbers in Europe and this morning UK consumer confidence has complimented that by rising to its highest level for seven months.
Whilst this is encouraging we can’t get too excited as these rises are from very low bases. In addition, today’s UK data was compiled ahead of the GDP release which showed the UK contracted more than had been expected in Q4 of 2011.
But even if the GDP figures were known to those surveyed towards the beginning and middle of January, the fact is that inflation is coming down and is expected to fall sharply throughout the year. Consumers are always going to be happy about that and rightly so.
However bond markets, on the other hand, remain less optimistic as Portugal’s borrowing costs soared yesterday and, even though Italy’s bond auction was considered a success, their borrowing costs remained stubbornly high.
At the time of writing the FTSE is higher by 45 points or so taking it back above the 5700 level to 5715. The strength in US and Asian markets overnight is the main reason for the recovery and perhaps there might be a hint of window dressing as January draws to a close.
Promises of a conclusion of the Greek debt talks continue and remain in focus for the financial spread betting markets, as well as the Portuguese ten year government bond yield.
Economic data is thin on the ground this morning and then later in the day we get US consumer confidence numbers.
Across the pond, confidence has really bounced strongly and so expectations are for a further rise, but not to the extent of recent months. As a result it may not cause any big fireworks on the US shares markets this afternoon.
Forex spread betting investors are seeing a sharp rebound in the euro this morning after it fell 70 pips yesterday against the dollar.
Traders moved out of the single currency on the back of Fitch downgrades and Greece’s failed attempt to strike a deal with private bondholders.
The world looks a different place this morning, as Greek PM Papademos said progression has been made with bondholders over a debt-swap, meaning a deal could be around the corner.
His announcement was enough for traders to close out any short positions on the euro, causing a fall in the dollar. The pair is currently trading at $1.3175, with support at $1.3075 and resistance at $1.3230.
With a stronger US dollar, gold found it hard to break into positive territory yesterday, ending the session down $8 at $1729.5.
It seems investors around the world were yet again nervous about European debt woes, helped by the lack of an agreement materialising with Greece’s creditors over the weekend, which dampened the bullish momentum.
Another factor in the decline may have been profit taking as traders looking at their gold technical analysis may have thought that the precious metal was getting too high above the moving averages.
Nevertheless, at time of writing, the yellow brick has made ground and added yesterday’s losses back on to the price with a tad more, trading at $1743.1.
Concerns over Iran’s nuclear powers were alleviated in yesterday’s session as the International Atomic Energy Agency began its visit to the Middle Eastern nation, showing that they’re not completely closed off to dialogue.
Something else to consider in the day’s decline was risk adverse investors finding safety in the US dollar, which in turn helped drive crude prices lower. At time of writing, Brent is up on the day at $111.62.
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.
Financial Spreads >>
"With FinancialSpreads.com you get all the normal
advantages of Spread Betting plus..." >> read
Financial Spreads review.
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Risk Warning: 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.
Article provided / approved by Financial Spreads which is a trading name of London Capital Group Ltd which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 182110.
'Financial Markets' edited by Simon Denham, updated 06-Feb-12
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