The regular monthly spread trading review from IG Index.
FTSE 100 Index News
"FTSE hits 12-month high"
The FTSE started the final quarter of the year on somewhat shaky grounds, losing around 150 points in the space of just a couple of days at the start of October.
But this sell-off only dipped to mid-September lows of around 4950 and within a couple of weeks, the FTSE was once again reaching back up towards 5300 - its best level since before the banking crisis exploded in September 2008. September 2009 ended with the FTSE recording its best performance in three months.
It's a cliché that ‘bull markets climb a wall of worry’ and the FTSE’s rally since March has been no different. There has always been the nagging doubt that share prices were getting ahead of the broader economic recovery, but when official GDP figures in October showed that the UK was surprisingly still officially in recession, shares barely flinched.
However, as we headed towards the end of October, UK shares gave up a significant portion of the gains seen for the month and this has left traders wondering whether the market is overdue some sort of a pause at the very least.
Those lows from mid-September and last month – around 4950 – are likely to remain a key focus point in the weeks to come, with traders anxious to see if they can stave off deeper slides yet again.
(IG Index price data: compiled 5 November 2009)
UK Ecconomic News
"Sterling drops on GDP shocker"
Tuesday, 23 October 2009 was expected to be a big day for the UK economy. It was the day when third-quarter gross domestic product figures would be released.
The GDP data was widely expected to show economic growth for the UK which, albeit modest, would have officially moved us out of a recession. So when figures showed that GDP had shrunk once again, this time by 0.4%, traders were more than surprised.
The biggest immediate casualty was the GBP/USD exchange rate. This dropped by 250 points in the hour following the announcement as traders around the world understandably saw this as negative for the Pound.
By the following week, some calm returned to GBP/USD and it managed to claw back a good portion of these losses before being hit by another bout of selling at the end of October.
The next few months have the potential of remaining volatile and any recent weakness has managed to hold above the lows from the middle of October in the $1.6200/$1.6250 area. This is likely to remain in focus if the Pound once again falls out of favour.
(IG Index price data: compiled 5 November 2009)
Oil Trading News
"One-year high for oil"
With at least some of the economies around the world making a gradual recovery, the price of oil has unsurprisingly followed suit. The expectation has been that if industry gets back to pre-credit crunch levels then there will, of course, be an increased demand for fuel.
All of this served to lift the price of crude oil from a low of around $33 per barrel in January to almost $82 per barrel in October.
This was after some fairly sideways trading over recent months, but the break through $75 was the catalyst that put real momentum back into the price of oil.
Once again, this has led many market commentators to speculate that triple digit oil is not going to be far away.
It was at the beginning of October 2008 that we last saw a price of $100 per barrel and, with global recoveries always at the forefront of traders’ minds, oil should remain an interesting market to follow through November.
(IG Index price data: compiled 5 November 2009)
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 2009' edited by IG Index, updated 17-Nov-09
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