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.
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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.
Article provided / approved by IG Index which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 114059.
'IG Index Review of October' edited by IG Index, updated 10-Nov-08
Index of UK financial market trading articles - the regular closing market comments from IG Index...see Index.
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Risk Warning:
Please note that spread betting and CFD trading carry a high level of risk to your capital. You can lose more than your initial deposit. These products 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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