The regular monthly spread trading review from IG Index.
IG Index FTSE Trading - June 08
"FTSE 100 continues to dive"
The second half of May saw weakness creeping into the UK blue-chip index and this really gathered momentum in June. Although there were brief signs of strength throughout the month, the FTSE 100 still lost more than 400 points and dropped back to levels not seen since March this year.
It was the usual suspects weighing on the market: oil pushed out to record highs once again, above $143 per barrel this time around. Concerns about the banking sector did not go away and some of the UK's largest banks such as Barclays, RBS and HBOS saw share prices slip to levels not hit for many years. In addition, concerns about the state of the UK property market also weighed with Persimmon, the last housebuilder on the FTSE 100, ejected after a large drop in value.
This latest bout of weakness leaves the index in an interesting position as we enter July. On two occasions already this year the FTSE 100 has slipped back to the 5300/5400 area, only for the negative sentiment to fade, and we have seen impressive rallies.
The big question at the moment, for traders and investors alike, is whether history will repeat itself or whether the UK index will slip to fresh lows.
(IG Index price data: compiled 2 July 2008)
IG Index US Markets
"Worst June for Wall Street since Great Depression"
It was a bad month all round for share prices, with the Dow Jones Industrial Average experiencing its worst monthly performance in more than five years and its worst June since 1930.
A combination of high oil prices, concerns about the financial sector and bombed-out consumer sentiment dragged the index lower once again, notching up a net loss for the month well in excess of 1000 points.
Not surprisingly, the pattern carved out in the US is similar to the one left by the UK market. In January's vicious sell-off, Wall Street dipped below 11,300 before bouncing back and eventually trading through 13,000 by May. Recently, the index has closed at fresh lows for the year – the 11,000 levels will be closely watched over coming weeks to see if the current decline has halted.
(IG Index price data: compiled 2 July 2008)
IG Index FX Markets
"US Dollar moves higher against Japanese Yen"
It has been something of a mixed year for the US dollar so far as it has continued to lose ground against the euro but remains fairly flat versus sterling. One currency that the US dollar has fared well against over the past few months is the Japanese yen, with USD / JPY rising by around 1000 pips since the March low.
Going into July, this has left the more technical traders with an interesting dilemma. Since June 2007 the currency pair had experienced a steady decline, dropping from the ¥124.00 level to ¥96.00 in March. Successive rallies eventually ran out of steam and the downtrend continued.
But the rally since then has pushed the market back up towards the highs seen earlier in the year and the question now is whether this is just another 'dead-cat bounce' or the start of a more sustainable recovery for the dollar versus yen.
(IG Index price data: compiled 2 July 2008)
The above comments do not constitute investment advice and neither IG Index nor Clean Financial accept any responsibility for any use that may be made of them.
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'IG Index Review of June' edited by IG Index, updated 06-Jul-08
Index of UK financial market trading articles - the regular closing market comments from IG Index...see Index.
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