FTSE Spreads Rise Ahead of Key EU Fiscal Integration Summit
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 5 December 2011
This morning it seems that we are clinging onto last week's gains.
At this stage it’s purely a continuation of last week’s bullishness as investors look ahead to this week’s crunch EU summit believing that politicians won’t fall short this time because the ramifications of inaction are far too great.
December is also historically the most bullish month of the year and so those fund managers who’ve struggled to perform will not want to miss out on any potential rally into the year end.
The FTSE has commenced the week in relatively a bullish mood just putting itself in the black although it’s hardly a convincing rise.
We’re only just clinging onto gains at the moment but it’s better than where we thought we’d start back on Friday night when US markets ended the week on a small downer.
You won’t be surprised to hear that the main highlight of this week is an EU summit to be held on Thursday and Friday where greater fiscal integration is expected to be proposed.
Not another EU summit I hear you cry. What can they possibly do to provide a definitive answer to the whole Eurozone crisis that they couldn’t already have proposed at the previous ones?
Well this one is largely seen as being the be all and end all summit, with the spread betting markets hoping for the big bazooka, namely the ECB, having a greater role in ending the crisis once and for all.
The coordinated action from central banks last week has been complimented by lots of announcements of austerity measures over the weekend.
Italy and Ireland are the latest to announce their measures to reign in their debt which in Ireland’s case is yet another round.
They are the only country to prove that austerity can work. Unfortunately for them however, their deficit was so large that another dose of austerity was always going to be needed and this can’t be ruled out for other EU members too.
In the run up to this week's summit it’s hard to see index spread trading markets doing much unless there’s a surprise to catch us off guard such as the central bank move last week.
This was the main contributor to the rally we’ve seen thus far this month and, with the FTSE trading at around 5560 at the time of writing, there’s lots of near term resistance levels. These resistance levels are seen at 6515/50/85 and to the downside support is seen at 5490/00 and 5340.
Today sees lots of PMI service numbers released with the UK’s expected to just about cling onto the 50.0 level.
A dip below will mean that the service sector’s run of expansion will have come to an end after 10 months on the trot. With the headwinds faced by UK businesses out there it’ll be a close call come 9:30 London time this morning.
Let’s put it this way, if we had the snow like we did this time last year then we would probably see this number come in well below 50.0.
The euro is showing a degree of life this morning as EUR / USD bounces off the $1.3400 level. At $1.3440 at the time of writing near term support and resistance is seen at $1.3340/05, $1.3255 and $1.3545/70.
With strong resistance around the $1750.0 level, gold found it hard to sustain the gains seen on Friday.
So after investors saw it reach a higher high of $1763.0, they decided to start banking their profits when good Non Farm Payroll data was released. This showed that the US unemployment rate had dropped to 8.6%, the lowest level since March 2009.
All in all, the precious metal rallied $4 to close at $1748.95, which at time of writing hasn’t seen much action and is trading at $1745.3.
An as expected rise of 120,000 US jobs last month and a lowered unemployment rate saw energy investors bump up prices of crude oil. This came on optimism that crude oil demand will be boosted in the near future, considering the continued recovery in the global economy.
There was a slight limitation to the advance however, with the US Dollar rallying, but nevertheless Brent crude still closed up at $110.11. This morning Brent is a little firmer at $110.90.
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 Rise Ahead of Key EU Fiscal Integration Summit' edited by SD, updated 05-Dec-11
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