The regular monthly spread trading review from IG Index.
IG Index FTSE Trading - Mar 08
"FTSE 100 posts worst-ever first quarter"
After a period of sideways trading in February, the bearish sentiment returned to the UK stock market in March. By the end of the month, the FTSE 100 was down by more than 11% for the year to date. The worst start to a year since the inception of the index back in 1984.
Most of the data from the past few weeks left traders and investors with a somewhat gloomy view. For example, at the end of March a report from investment bank Lehman Brothers reckoned that there is a one-in-three chance of the UK entering a recession over the next two years. The continued crisis in the banking sector and worries about inflation and the housing market ensured that sentiment remained downbeat last month.
Turning to the charts for the FTSE 100, the one bright spot from March is that even though the market slid, it did manage to hold above the intraday low that was set in January. It will be interesting to watch this point (just ahead of 5300) for more weakness over the next few weeks to see if it can once again act as support.
(IG Index price data: compiled 1 April 2008)
IG Index Banking Sector Trading
"Banks still in the spotlight"
Since the 'credit crunch' first bit in the summer of 2007, the banking sector has not been far from the headlines. March proved to be no different and kept traders worrying about whether there might be more shocks to come for the financial system.
The biggest news centred on US investment giant Bear Stearns. A loss of confidence in its financial position led to a takeover approach from JP Morgan Chase. Last month the share price of Bear Stearns plunged from $80 to trade at around $10 by the end of March.
UK banks also experienced a degree of volatility, with HBOS suffering a drop of around 17% one morning due to what the bank referred to as 'malicious rumours'. With Swiss banking giant UBS kicking off April with an announcement that it is doubling its sub-prime writedowns, it seems unlikely that bank shares are going to fade into the background any time soon.
(IG Index price data: compiled 1 April 2008)
IG Index Gold Markets
"Gold loses some of its shine"
With the ongoing crisis in the continuing to worry investors and traders alike going into March, it was perhaps unsurprising to see gold continue to set fresh all-time highs. In the middle of the month, the price traded above $1,030 per troy ounce, notching up a gain of nearly 25% for the year-to-date.
But just in case anyone needed reminding that markets can go down as well as up, the price reversed sharply from these all-time highs to end the month just above the $900 level, and registering a loss for March.
The yellow metal started April in similarly bearish mood, with a weaker Crude Oil price and stronger dollar seeing the price nudge below the $900 mark. This has left some traders eyeing the lows set in January, around the $850 levels, as possible potential support in the face of any more weakness.
(IG Index price data: compiled 1 April 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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Risk Warning: Financial Spread Trading and CFDs carry a high level of risk to your capital. You may lose more than your initial investment. They may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
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'IG Index Markets March' edited by IG Index, updated 04-Apr-08
Index of UK financial market trading articles - the regular closing market comments from IG Index...see Index.
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