Gold Futures Tumble as US Federal Reserve Fails to Increase Stimulus
The regular trading review of the main UK, US and European markets, plus a quick look at the commodities and forex markets.
For today's report see Financial Trading Review.
Financial Trading Review - 22 June 2012
UK Trading Review
UK markets closed lower yesterday, led by a decline in mining and financial sector stocks, after weak manufacturing reports in Europe and China compounded fears about a faltering global economy, shrugging off better-than-expected domestic retail sales data.
In shares spread betting, BHP Billiton, Rio Tinto, Vedanta Resources and Anglo American fell between 3.1% and 5.2%, as a gauge of China’s manufacturing activity slipped to a seven-month low.
Barclays and Royal Bank of Scotland shed 1.7% each, while Standard Chartered lost 2.1%, amid a possible looming downgrade of major global banks by Moody’s Investor Services.
Royal Dutch Shell, BG Group and BP lost between 1.3% and 3.2%, tracking a decline in crude oil prices. WPP fell 1.0%, as Jefferies reiterated its “Underperform” rating on the stock. Invensys tumbled 14.4%, after rejecting a takeover approach from Emerson Electric.
FTSE 100 shed 1.0% to settle at 5,566.4, while FTSE 250 lost 0.7% to end at 10,944.7.
European Trading Review
European markets slid yesterday, as downbeat economic data in the US and Germany, and preliminary data that pointed to a decline in China’s manufacturing activity weighed on market sentiment.
Investors also remained cautious in anticipation of the audit of Spain’s banking sector. Banks, Societe Generale and BNP Paribas declined 1.3% and 1.4%, respectively, amid reports that Moody’s Investors Service was set to downgrade major UK banks later in the evening.
Carmakers, Volkswagen, Daimler and BMW dropped between 0.8% and 3.1%, as signs that global economic recovery is faltering raised worries about future demand.
Royal KPN lost 5.3%, after UBS downgraded the stock to “Neutral” from “Buy”. Retailer, Cewe Color Holding fell 1.8%, despite a “Buy” call on the stock by Deutsche Bank.
FTSEurofirst 300 index fell 0.5% to end at 1,008.9. German DAX Xetra 30 dropped 0.8% to 6,343.1. French CAC-40 closed 0.4% lower at 3,114.2.
US Trading Review
US markets dropped sharply yesterday, as a drop in regional manufacturing activity and disappointing labour and housing market data spooked investors.
Moreover, a drop in Eurozone business activity and contraction in China’s manufacturing also weighed on market sentiment. Morgan Stanley, JP Morgan Chase, Goldman Sachs Group, Citigroup and Bank of America slipped between 1.7% and 3.9%, amid speculation of an imminent downgrade of major global banks by Moody’s.
Financials also extended losses after an independent audit showed that Spanish banks would need up to $78 billion in new capital. Bed, Bath and Beyond plummeted 17.0%, a day after the company forecasted weak earnings for the second quarter.
Micron Technology slumped 7.8%, after it reported a fourth consecutive quarterly loss.
DJIA slumped 2.0% to settle at 12,573.6. NASDAQ plunged 2.4% to close at 2,859.1. S&P 500 tumbled 2.2%, to end at 1,325.5.
Forex Trading Review
At 0400 BST today, the GBP is trading 0.1% higher against the USD at $1.5613, flat against the EUR at €1.2432, and 0.3% higher against the JPY at ¥125.27.
The EUR is trading 0.1% higher against the USD at $1.2560. Earlier, the currency was trading lower, amid speculation that a report would show German business confidence fell in June, raising fears that the global economy is faltering.
The EUR is trading 0.3% higher against the JPY at ¥100.76.
The USD is trading higher against the JPY, after spreads between the difference between yields on Japanese and US two-year government securities this week reached the most since April 5.
The AUD and NZD are trading higher against the USD, ahead of reports due to be released next week that might point to a slowdown in home sales growth and weakening consumer confidence. This is raising speculation that the US Federal Reserve might consider another round of asset purchases, or quantitative easing.
Yesterday, the EUR closed lower against the USD, amid mounting concerns about the European sovereign debt crisis, after Moody’s Investors Service downgraded 15 global banks.
The currency also lost value, as downbeat global economic reports and concerns about the US, Europe and Chinese, economies dampened the demand for riskier assets.
The GBP closed higher against the EUR, after UK retail sales rose more-than-expected in May and survey indicated that total industrial order book balance in the country rose in June.
The CAD finished lower against the USD, as investors sought the safety of the greenback, following weak US economic reports and tightening of domestic mortgage rules.
Commodities Trading Review
In Asia, crude oil for August delivery is trading 0.6% or $0.45 higher at $78.65 per barrel.
Yesterday, crude oil for August delivery declined 4.0% or $3.25 to settle at $78.20 per barrel, as downbeat economic data from China, the US and Europe raised concerns over demand prospects.
Crude oil prices remained under pressure as global crude oil inventories continue to remain well supplied on higher oil production from Saudi Arabia and on sluggish demand.
Gold for immediate delivery is trading 0.3% lower today, at $1,563.85 per ounce.
Gold futures for August delivery dropped 3.1% or $50.30 to $1,565.50 per ounce yesterday, as the US dollar strengthened amid downbeat global economic reports and a day after the US Federal Reserve failed to announce new monetary stimulus after its policy meeting.
Financial Trading News
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The above comments do not constitute investment advice and neither ETX Capital nor Clean Financial accept any responsibility for any use that may be made of them. Any prices or data are indicative and subject to change without notice; its accuracy is not guaranteed and should not be relied on.
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'Gold Futures Tumble as US Federal Reserve Fails to Increase Stimulus' edited by ETX Capital, updated 22-Jun-12
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