The regular monthly spread trading review from IG Index.
IG Index FTSE 100 Spread Trading - October 08
"FTSE 100 continues to slide"
You would have to have been living in a cave to avoid the ongoing doom and gloom surrounding the world's stock markets in October. Continual worries about the financial sector dogged sentiment from early in the month and worse-than-expected UK economic data pushed the market down to its lowest point since April 2003.
The third-quarter UK GDP figure was a negative number, as expected, but the actual reading of -0.5% was still something of a surprise. During the month, the FTSE 100 traded below 3700 as investors worried that any coming recession could end up being worse than originally thought.
Shares staged a strong rebound in the last few days of October, leaving traders trying to figure out if this was just another dead-cat bounce or if it was time to start thinking that the worst, for markets at least, could be behind us.
(IG Index price data: compiled 4 November 2008)
Spread Betting on Mining Companies
"Mining sector still in the doldrums"
The last few months have seen the banking sector in the limelight as the sub-prime drama continued to unfold. But a major casualty of the recent slowdown has been the mining sector which is down by more than 50% from its May highs.
The unwinding of the commodity boom over recent months and big falls for copper, gold and oil have had a corresponding knock-on effect for the share prices of major UK mining companies such as Xstrata, Rio Tinto and BHP Billiton.
With these companies historically making up a significant proportion of the FTSE 100, the weakness in mining has exacerbated the drops in the index. In common with other sectors, there has been a bounce back towards the end of October but the last few months have served to remind many that there is no such thing as a sure one-way bet in financial markets.
(IG Index price data: compiled 4 November 2008)
Spread Betting on GBP / USD
"GBP/USD plunges once again"
For many years the story across currency markets had been one of ongoing weakness for the US dollar. However the dollar's performance this year would suggest that reports of the greenback's demise were premature. This is very clear from its performance against Sterling.
At the start of 2008, a pound would buy you roughly two dollars and yet at one point in October the pound came very close to being worth just $1.50. There were a few reasons behind the continued weakness for GBP/USD. There is speculation about the possibility of further cuts to come from the Bank of England on interest rates, a very gloomy outlook for the UK economy in relation to the rest of the world, and also a perception by some that the US dollar could be a safe haven in these troubled times.
It remains to be seen whether the $1.50 level will be seen as a floor for GBP/USD. As in other markets recently, we have seen impressive rallies for the pound after the weakness but so far these have been met with renewed selling. Either way, it looks set to be a volatile finish to the year for this particular currency pair.
(IG Index price data: compiled 4 November 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.
IG Index provides an execution-only service. The material above does not contain (and should not be construed as containing) investment advice or an investment recommendation, or, an offer of or solicitation for, a transaction in any financial instrument. IG Index accepts no responsibility for any use that may be made of these comments and for any consequences that result.
Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It 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.
'IG Index Review of October' by IG Index, updated 10-Nov-08
For related pages also see:
IG Index Review of November, updated 15-Dec-08
While the FTSE 100 managed to hold above its earlier lows, this was not the case for the S&P 500. During November, the broader US index slipped back to...read article. IG Index Review of October, updated 10-Nov-08
The last few months have seen the banking sector in the limelight as the sub-prime drama continued to unfold. But a major casualty of the recent slowdown has been the mining sector which is...read article. IG Index Review of September, updated 09-Oct-08
When the US first announced a $700 billion bail-out of the financial sector, the indices staged significant rallies. But when the initial vote on 29 September failed to pass the bill, the Dow Jones recorded its biggest...read article. IG Index Review of August, updated 10-Sep-08
The strength of the US dollar took its toll on the price of gold. Back in March we saw all-time highs for the yellow metal but since then it has not had the same sort of momentum. In August the price broke below the $850 support level and eventually traded down to ...read article. IG Index Review of July, updated 07-Aug-08
The second half of July saw a significant bounce-back, with the FTSE 100 up around the 5400 level. The big question in the weeks to come is whether...read article. IG Index Review of June, updated 06-Jul-08
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...read article. IG Index Markets May, updated 09-Jun-08
The price of oil is seldom out of the news for long and last month was no exception. May saw the multi-year trend for crude oil continue, with the July contract pushing out to $135 a barrel. That is a 35% gain for this year already and more than double...read article. IG Index Markets April, updated 07-May-08
US dollar weakness, particularly against the euro, is another trend that has been clear for some time. The EUR/USD hit a fresh high in April, albeit briefly, with the currency pair poking above the $1.6000 level for the...read article. IG Index Markets March, updated 04-Apr-08
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...read article. IG Index Markets, updated 04-Mar-08
Monthly Review: For much of the month, the 6000 level proved to be a ceiling for the index with successive rallies into this zone bringing the sellers back out. Over the last week, the FTSE staged more of a decisive push through here but we go into March with many still wondering if there is a more sustainable rally to come. Or is this just a...read article. IG Index Spread Betting Markets, updated 01-Feb-08
Monthly Review: Where next for the major world stock markets? During January, the FTSE 100 traded back to levels not seen since October 2005. This has left many concerned that this kind of a decline is not a healthy correction but a sign of things to come. Going into February, the market has regained the 6000 level but it is probably fair to say that ...read article.
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Risk Warning: Spread betting carries a high level of risk to your capital and you may lose more than your initial investment. It 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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