FTSE 100 Stock Market Index Sees Support Ahead of EU Summit News
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 20 October 2011
European leaders continue to try frantically to agree on a resolution for the EU and are running against the clock.
It has even come to the French President missing the birth of his first baby with his new wife in order to try and quell the growing concerns.
Whilst bank after bank and country after country receives a credit rating review or downgrade, investors are getting even more jumpy and nervous ahead of the weekend.
It is difficult to focus on little else and it feels like this comment has been talking about nothing other than the Eurozone for some time.
Corporate earnings on the whole has been good with some bright spots from Europe, even if they are very much emerging markets stories, and the UK’s highs street has seen Debenhams come in with some decent numbers too.
But all this is brushed aside by the overriding crisis unfolding on the continent. We can probably thank our lucky stars that we are not part of the euro; however it is hugely important for our own economy that the economic block remains stable.
If our biggest trading partner was to spiral into a recession, and bring its banking sector with it, then the ramifications for the UK would be considerable. All the money that’s been thrown at the problem so far would be piecemeal compared to the worst case scenario.
Investors remain nervous and we can see that this morning with the FTSE down some 75 points to 5375. The stock market index has found a little bit of short term support however around this level which is where we bounced off on Tuesday.
A break below here could open up the way for 5300 and below, meanwhile advances are capped by 5520/55 and then 5600.
It’s hard to see much movement away from the narrow trading range that has developed so far this week until investors can be surer of what lies ahead for the Eurozone.
This morning sees retail sales from the UK which are expected to bounce following the riots. The spread betting markets seem to be expecting this to be more of a flash in the pan as opposed to a change in the longer term trend for the high street.
Consumers are still feeling the pinch and the longer term prospects for retailers looks tough. At least many of the clothing shops will be happy that winter has finally arrived so they can shift their enormous stock of jumpers.
So there was strong interest in the euro yesterday and traders piled into the single currency, hiking it 140 pips against the dollar, but by around 7pm it had almost reversed the whole day’s gains.
We saw the shift after S&P cut Slovenia’s credit rating, which encouraged FX spread betting investors to move out of long euro positions.
At the moment we have the ongoing speculation regarding the Franco-German divide and this is causing concerns as to how the European Financial Stability Facility can be maximised.
The euro is still dropping off this morning and is trading at $1.3686 against the dollar. With equities down strongly as well this morning, traders don’t appear to be in the mood for any risk-taking.
The disappointing diagnosis on the state of the US economy helped weigh on global equity markets, which meant gold’s losses were extended for the third day in a row.
It shows that risk adverse investors are still keeping a wide berth from the yellow brick and have surely dumped its safe haven status in the trash.
By the end of the trading session, the precious metal had $11 wiped off its value, pricing it at $1643.1. At time of writing, it’s looking like we could be in for a fourth loss filled session, as the yellow metal is down to $1610.
The drop in crude stocks of 4.7 million barrels, released by the US Department of Energy in the weekly oil inventory report helped push crude prices up yesterday, but not for long.
The pessimistic view on the soon-to-be-released Beige Book report had more power over investors and this caused a sharp decline in black gold’s price. At time of writing, the Brent crude oil is trading at $108.11.
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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'FTSE 100 Stock Market Index Sees Support Ahead of EU Summit News' edited by SD, updated 20-Oct-11
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