Indices Spread Trading: German DAX Rises After Bernanke Comments
Spread Betting 27 March 2012
Spread trading markets are in recovery mode following the falls of last week after confidence data in Europe and comments from Ben Bernanke gave equities a boost.
US markets rallied overnight and that positive sentiment has followed through to European indices this morning.
Bernanke's comments tend to move the markets regularly in one direction or another and the central banker is due to speak again later today.
As a result, you can't rule out the chance that he will try to caveat his dovish comments about the US labour market, which signalled the chance of further QE and thus led to the rally. If he states that the economy is in good shape, we could possibly see a reversal.
We've seen similar moves before when one day the market has interpreted what he's said as being particularly bearish for stocks and then the next being bullish, causing a couple of days of exciting volatile trading.
It's all about RBS this morning after revelations that the government is in talks with sovereign wealth funds to buy part of its stake in the bank.
This is hardly a revelation though as the coalition is probably desperate to offload this poisoned chalice. What once looked like it would end up being a bargain for the taxpayer has in fact ended up being yet another poor investment decision made by politicians.
The priority of course is to get a return on our investment, but selling in tranches and offloading slowly but surely is probably the best way to get the best out of what has turned out to be a bad investment.
As all good traders should know, you should always cut your losses, which is what we did with our Northern Rock stake and the same may have to be done with RBS.
The shares are actually in bid mode this morning with RBS being the top gainer at over 5% as investors like the idea of reducing the government's control on the company. The stock is now knocking on the door of an 8 month high.
The bounce by the FTSE this morning is not as convincing as the rally in the Dow yesterday and at the time of writing the London market is at 5915 up only a few points.
The German DAX on the other hand is in much better shape, putting on almost double the percentage gain than the FTSE, and isn't far off testing its year highs around 7200.
The euro spiked to its highest level this month versus the dollar on the back of speculation the Fed will maintain easy monetary policy, in order to bolster growth.
Bernanke's comments yesterday caused currency spread betting investors to sell the dollar as they anticipated the so-called QE3, third lot of quantitative easing.
Coupled with the fact that EU finance ministers will agree to reinforce the Eurozone debt-crisis firewall this week, the single currency was in favour with traders and the pair jumped to $1.3368 last seen on 29 February. The pair broke through the $1.3294/303 resistance range, which could signal potential to move higher to $1.3489.
Those investors spread betting on gold saw the biggest daily gain since late January in yesterday's session, with the precious metal touching a high of $1693.8. This came on Bernanke's comments stating that there was still a requirement for ultra-loose monetary policy to help reduce the current unemployment levels.
This gave the long awaited boost to the yellow brick which bulls have been so patiently waiting for since the recent bout of weakness crept in.
Support was also provided by the weaker dollar, so all in all the precious metal gained $26.2 to close at $1690.0. Currently, gold sits slightly offside at $1689.3.
Much like gold, crude prices were driven by the Fed Chairman's comments on the state of the US economy and the possibility of a further bout of quantitative easing.
Support was also provided by the ongoing supply concerns and tightening Western sanctions on Iran over the Middle Eastern nation's disputed nuclear programme. At time of writing, Brent crude sits at $125.37.
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'Indices Spread Trading: German DAX Rises After Bernanke Comments' edited by SD, updated 27-Mar-12
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