FTSE Spreads Fall on Financial Transaction Tax Comments
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 29 September 2011
"The banks got us all into this mess so I know what we'll do, we'll slap a tax on every single financial transaction.
That'll teach them to trade risky products and threaten the global economy with collapse again in the future."
The Tobin tax proposed by the President of the European Commission is probably an even greater threat to the economic recovery of its member states than anything else. The problem is that it risks driving vast amounts of tax paying businesses, which employ millions of Europeans, out of Europe.
Whilst it's not clear exactly how the whole thing will work, as it stands it could conceivably be that every bond, share, FX, commodity and any other asset class deal transacted will have a tax added to it. And that could possibly even include our very own spread betting and CFD transactions, which are currently exempt from UK stamp duty*.
The cost of dealing would soar and it would affect all exchanges, inter dealer brokers, banks, stock brokers, FX brokers, to name but a few, in the whole of the Eurozone.
The resultant loss in tax gleaned from these firms due to lower revenues, or even simply because they relocate, could conceivably dwarf the tax generated.
If politicians are still hell bent on gaining the populist vote by being seen to be tough on the banks then surely it's the banks they should be targeting and not every single institution that facilitates a financial transaction.
Enough on politics and onto the indices markets which once again have shown how investors are by no means convinced that the we are out of the woods yet when it comes to the Eurozone debt crisis.
The theme has been dominating the headlines for the last couple of years, but more so in the last few months. Markets now seem to be demanding that differences between countries are put to one side so that a solution can be reached ahead of the G20 meeting in Cannes at the beginning of November.
This morning the FTSE is seeing the nerves that set in yesterday just follow through to today. At the open we're back below the 5200 level at 5190 so a little softer.
With lots of important meetings and votes today investors will be focusing on whether the troika's visit to Greece will result in it receiving its next lump sum of bailout.
The harsh austerity medicine that Greece to taking in order to receive its bailout cash is starting to become unbearable for its population as tax rise after tax rise is complimented by spending cut after spending cut.
Also today the German vote will be monitored closely, not because the vote is expected to go against Chancellor Merkel, but to see just how big the rebellion within her own coalition party is.
If she loses the "Chancellor's majority" then this could spell trouble for the ruling party and the opposition will start to call for an election. Such destabilisation is precisely not what the Eurozone needs right now.
There are also some important data releases today that'll be watched. There's EU confidence this morning, US GDP data along with the weekly initial jobless claims and then we end off with pending home sales.
FX spread betting markets are relatively flat with a hint of Dollar weakness as both EUR/USD and Cable makes small gains.
The Euro has crept back above $1.3600 to $1.3620 but gains for the single currency remains contained as the elephant is still firmly in the room. Over the short term support and resistance is seen at $1.3570/1.3515/1.3475 and $1.3690/1.3750/1.3800.
The gold spread betting market's volatility continues and as other currencies just about have the edge on the Dollar this morning, the precious metal is seeing a little bit of strength early on.
The yellow metal is currently trading at $1632 following a weak session in Asian overnight. Bulls will be looking for a test of resistance at $1675 meanwhile they'll be hoping support at $1600/1585 and then of course the major recent low at $1535 will hold up.
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 Spreads Fall on Financial Transaction Tax Comments' edited by SD, updated 29-Sep-11
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