Online Spread Betting Markets Decline as European Central Banks Fail to Surprise
Spread Betting 6 July 2012
The lack of surprises from Europe's central banks yesterday left online spread betting investors rather deflated as the expectations had already been built into the market.
However, it was the downbeat comments from Mario Draghi that really dampened spirits. He went as far as saying that he expected the rate cut to have a limited impact on the Eurozone's economy.
Needless to say, the bulls didn't exactly come charging out into the ring, and so world markets were left rather disappointed. And that was despite China also reducing rates in an attempt to help growth, which would usually lead to a decent increase in risk appetite.
Question marks still remain over the BoE's quantitative easing program, which they have previously claimed has directly contributed to higher growth.
Unfortunately, it has also caused inflation to spike to levels that are much higher than in the Eurozone and the US. This is one of the real factors that are hurting the pockets of consumers.
The UK economy is stuck in something of a rut, and is most likely to remain in a recession in Q2. If the recent PMI data is anything to go by, we are going to need more than an extra £50 billion of QE to assist in the recovery.
Sometimes recessions can be long and arduous, and in this case things are not being assisted by the dire straits of our biggest trading partner.
In some ways I'm quite surprised that the BoE doesn't just keep hold of their cash or try something different. However, the problem is that they need to be seen to be doing something, even if it is still unclear what good QE does for the man on the street.
For the FTSE 100, the 5700 to 5725 level remains the near-term resistance that it simply can't get above for now.
With little support from US stocks yesterday, it's not surprising that we are seeing a little more profit taking, with the index down some 10 points to 5680 this morning.
Financial Spreads account holders continue to hold a bearish view around these levels, expecting little in the way of upside for the index. These investors presumably feel that this isn't a bad position given that the resistance still hasn't been taken out.
The big event in today's economic calendar is of course the US Non Farm Payrolls. Following yesterday's strong ADP figure, there's a glimmer of hope for some better news regarding the US labour market, and Mr Obama will certainly be hoping to see that.
Consensus is for 90,000 new jobs, up from last month's 69,000, whilst the unemployment rate is due to remain at 8.2%.
The big move in the currency markets yesterday was in EUR/USD, as the Eurozone's benchmark interest rate was reduced to a record low of 0.75%.
Many of our clients picked the move nicely, as they were short of the market before the rate decision and neatly exited their trades around the lows as well.
At the same time as the rate cut, the US ADP employment data came in a touch better-than-expected and provided extra support for the dollar. Consequently, the EUR/USD pair tumbled 135 points to $1.2389.
This morning, the market is taking a breather, trading just 10 points lower at $1.2379.
The lack of surprises in the ECB's interest rate cut didn't help gold's case yesterday, and the ongoing deterioration of the global economic picture is keeping inflation fears away.
Furthermore, as investors rushed into the dollar, gold prices dropped $10.2 to $1,605.00, with the precious metal losing the battle of the safe havens once again.
US crude oil futures posted a slight decline to $87.22 yesterday, driven by a strengthening US dollar and fading hopes that the central banks would add more stimulus than the markets expected.
This came despite a surprisingly higher-than-expected fall in the US weekly crude inventories.
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'Online Spread Betting Markets Decline as European Central Banks Fail to Surprise' edited by SD, updated 06-Jul-12
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