The regular monthly spread trading review from IG Index.
FTSE Spread Trading Report
First Half of 2010 Sees FTSE Lose 9%
The dramatic turnaround in sentiment for stock markets continued in June and the FTSE 100 index once again moved to fresh lows for the year-to-date.
To coin an appropriate footballing phrase, the first six months of the year was a game of two halves. The recovery that started in March 2009 continued into April but since then shares have come under increasing pressure with concerns that this stage of the recovery, at the very least, is over.
There has been a flurry of weak economic news that has knocked investors recently and worries over the ongoing sovereign debt crisis in Europe were never going to go away quickly.
There are also signs that the pace of economic recovery in China is starting to falter and the most recent data showed that US consumer sentiment took a much steeper than expected dive.
This has left the FTSE looking less than healthy going into July. The 5000 level, that had provided good support for the market all the way back to October, has been well and truly breached and some investors have been left feeling that stock markets had got a little ahead of the global recovery.
UK Currency Spreads News
Sterling Reacts Well to Emergency Budget
The major UK-specific event in June was of course the new coalition’s emergency budget. Expectations had been set for swingeing cuts to be announced in an attempt to start cutting the size of the UK deficit, so there were no real surprises when Chancellor George Osborne started to speak.
Initially, forex markets seemed a little unsure of how to react, but when he sat down it appeared that they had made up their mind that this would be good for the Pound and GBP/USD started to rally strongly. June saw the forex pair hit its best levels since election day and so far this strength has continued.
Looking at the longer term picture, many would argue that the trend for GBP/USD is still down, despite the recent strong rally, so it remains an interesting market to watch as a barometer of international opinion towards the UK recovery.
US 500 Index Financial Spread Betting Update
S&P 500 Breaks Key Support
It is fair to say that if there is one stock market index to watch for an indication of global investor sentiment then it is the S&P 500. By April, this US index had rallied by 80% from its March 2009 lows. However, the story in recent months has been somewhat different.
For much of this year, declines back towards the 1040 area had been short-lived and traders had viewed this as pivotal support for the S&P. But this changed towards the end of June as the now familiar concerns about the fragility of global recovery spooked investors and saw the market push back to levels not seen since October 2009.
Heading into July the S&P still remains weak and rallies have proved to be short-lived. The last two weeks of June saw a particularly steep decline and it remains to be seen whether investors will take the view that this has been overdone or alternatively that this is the start of a more serious market correction.
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 2010' edited by IG Index, updated 07-Jul-10
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