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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 27 January 2012
Our Dave hasn't been making many friends in Europe recently and his speech at the World Economic Forum in Davos yesterday didn't endear him any further.
But he was only saying what a huge amount of business leaders, economists and analysts have been saying for months, if not years.
He suggested that political leaders in Europe, those that wield the power, so France and in particular Germany, need to do more and fast in order to put a firewall around Greece and prevent contagion across the Eurozone.
The first indication of contagion was shown this week with Portugal's borrowing costs hitting an all time high. There's a belief that they will be targeted next regardless of the outcome in Greece where the debt talks continue today.
As the French President Sarkozy has said in the past that he's fed up with our Dave telling him what to do, he will definitely not have enjoyed the pragmatism of the speech.
Greek talks are due to conclude today but don't be surprised if they continue into next week as we've all too often seen delay after delay to the decision making.
So whilst the focus is on growth in Davos this year, there is also the touchy subject of executive pay.
This of course is being hotly debated here in the UK as the head of RBS takes another million as a bonus. How can he, it's a disgrace, where's his moral compass, many people are crying out.
Unfortunately, the hard cold fact is that that's what bankers are paid and he's only taken two thirds of what he legally and contractually could have been awarded.
In effect Mr Hester is a civil servant and you can rest assured that banking crisis or no banking crisis, even if the bank was fully state owned, he would still be paid what he is today as a minimum.
Senior civil servants are paid large sums of money in order to keep them in the civil service because the state knows that most could go to the private sector and probably be paid more.
In the end, if Mr Hester does his job properly then the two million a year we pay him will look very good value if he repairs the bank and we sell our stake for a profit.
So he might be a multi-millionaire, but he pressure is on him to turn the taxpayer's investment into a profit.
This morning the markets are giving back some of their gains from yesterday as the rally in US stock markets fizzled out last night.
The retreat is seeing the FTSE open lower by some 20 odd points as the bulls take a bit of profit from the strong gains yesterday.
It was a real risk on scenario following the Fed's announcement that interest rates are due to remain at their record lows into 2014 and you can safely say that a similar thing might happen here in the UK.
The buyers piled back into mining stocks as metal prices soared with gold and copper prices spiking.
With the 5800 level being tested this is the near term resistance level for the bulls with 5815 just above here also a target meanwhile to the downside 5740 and 5700 are seen as support.
Our financial spread betting clients continue to sell into the strength in the FTSE and felt a little bit of pain yesterday however this morning at least the little bit of weakness comes as some relief.
The euro has enjoyed very decent strength this week but this morning in line with the softer open for European indices it is a little lower against the dollar.
EUR/USD is at $1.3095 at the time of writing having almost had a look at the $1.3200 level yesterday.
With the talks in Greece being dragged on and the agreement between the country and its bond holders expected today, traders just seem to be holding off to committing any new positions for now.
Support and resistance is seen at $1.3050/25 and $1.3145/85 respectively.
The gold spread betting market was also in demand after its initial big spike on Wednesday then that strength continued through to yesterday as the yellow brick smashed through $1700 and onwards to $1730.
The profit taking across risk assets has filtered through to gold as well which is a little lower this morning to $1717.
The bottom line for gold is that if the US is thinking about more monetary easing, gold is likely to be a one way ticket and clients remain heavily long of the metal.
Near term support and resistance is seen at $1703/1680 and $1730/1738 respectively.
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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Spread Betting 26 January 2012
Markets are on the up this morning as they continue to see-saw with the boost this time coming from American shares.
Risk assets were in demand overnight as the US Federal Reserve said that interest rates across the pond are expected to stay at their current low level way beyond the previously expected time of mid-2013 and into 2014, most likely even the end.
The Fed continues to fear their ultimate dread of possible deflation in the future and so almost all of the members of the FOMC are calling for existing easy monetary policy to remain in place.
The fireworks set off last night were expected as it was the first time that the Fed used its new format for announcing its interest rate policy which is actually meant to make things more transparent and less volatile.
No matter which way they did it, over a longer press conference or a shorter one, the news that interest rates are to remain as low as they are for longer sent buyers into a bit of a frenzy.
The hints that there may be other attempts to prevent the world’s biggest economy from going back into recession, in other words “QE3”, also got the bulls excited and so US markets continued their march higher.
The S&P is now just under 4% off its 2011 high and the Dow is only a mere 1%. The Nasdaq 100 on the other hand has already surpassed its highs of 2012 indicating the true bullishness of US markets.
European indices have some way to go however as they lag their US counterparts and, even though we are higher at the open, the initial optimism following the spike in US markets last night already seems to be fading out.
The FTSE is at 5740 at the time of writing, attempting to recoup yesterday’s losses, and the gains are being led by miners.
They are basking in the rally after the big jump in the price of gold and copper, putting those stocks in high demand.
Our spread betting account holders remain sceptical of the strength in indices, being largely short of the likes of the FTSE. The longer the rally continues, the more you have to think that at some point a bigger move to the downside is just around the corner.
So far though since the beginning of October last year when you think “this is it”, the falls have failed to really follow through confounding the longer term bears.
The Fed’s pledge to keep interest rates between 0 and 0.25% until at least 2014, has signalled a very dovish stance. This meant only one thing for FX spread betting markets and commodity traders yesterday; sell the dollar.
Continuing on from yesterday, we have seen the dollar fall against pretty much every one of their counterparts, as riskier currencies look to claw back any recent losses.
Currently, the euro is trading up against the dollar at $1.3110 and is sitting above its previous resistance of $1.3035 which could signal further upside.
Over the near term support and resistance is seen at $1.3035, $1.2975, $1.2930 and $1.3160, $1.3195 respectively.
Spread betting investors long of gold yesterday evening would have been whooping with joy.
The precious metal doesn’t pay interest so during a time of low interest rates it is often bought as an alternative asset. This was certainly the case yesterday as, after the news from the Fed, there was a spike of some 40 dollars, meaning the highest level since December 12th was reached at $1713.0.
In total for the day, $45.2 was added onto the price of the yellow brick, which closed at $1710.6.
Support was also given from a slumping dollar and fear of inflation further down the road once the global economy gets back on its feet. This morning the bulls are taking a little bit off the top as gold trades at $1705.
The weekly oil inventories report from the US Dept of Energy showed a mixed bag, with crude stockpiles rising higher than estimated yet gasoline inventories dropped against expectations of a rise.
On the back of this, the crude oil spread betting market remained around par until the Feds statement that interest rates were staying low for longer, which caused a slight rally, but only enough to push prices marginally higher. At time of writing, Brent crude trades at $110.41.
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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Spread Betting 25 January 2012
Today many spread betting investors will focus on the meeting of business leaders for a bit of skiing and discussion in Switzerland as the annual World Economic Forum in Davos gets under way.
It seems likely that there'll be a lot less hot air produced from the discussions in the highest City in Europe than there are going to be at the next EU summit at the end of the month. However, the realisation is that it's not they who hold the key to the end of the world wide debt crisis, rather it's the politicians.
Unfortunately, if history over the past few years is anything to go by, we can't hold out much faith in our politician's ability to be able to solve the crisis. A great deal that will be discussed over the next week is likely to fall on deaf ears.
Growth remains one of the big issues of the day. There are at least efforts to a degree by many European countries to reduce their debt burdens, but they will only get to where they want by stimulating growth and creating jobs.
In the UK the first reading of Q4 GDP numbers are expected to show a retraction in the economy at the end of 2011, the first part of a possible technical recession if we see Q1 of this year also retract.
Consumer confidence remains downbeat and jobs continue to be cut back in both the public and private sector and this time round our George won't be able to blame the weather for the GDP decline.
The only problem with trying to stimulate growth at this time in the economic cycle is that it will almost certainly require money in the short term, money which governments can't afford at the moment.
Other ideas are needed such as cutting red tape for employers, something we have discussed before.
The big question is whether the UK will avoid a technical recession and the answer at the moment is that two quarters of negative growth are not expected at the moment.
We managed to avoid this a year ago and, looking at the PMI surveys, both the manufacturing and services sectors remain in the expansion zone.
There's lots of economic data out today with the German Ifo business survey before we get the UK GDP numbers.
The German numbers are expected to highlight that Europe's biggest economy is still in good shape and their businesses are hiring people as their export market remains strong.
Later on today the US bowls in with pending home sales and then the new format to the FOMC rate meetings takes place.
The decisions are being brought forward to earlier in the day, so 15:30 London time and then the statement from Bernanke follows at the usual time of 19:15.
We are supposed to see more transparency as to what the outlook is for growth, inflation and interest rates so it will be interesting to see just how much Bernanke is willing to give away.
The last meeting was rather downbeat about the economy, so there's a chance that he'll mention interest rates are due to remain low beyond mid-2013 and into 2014.
So in the build up to lots of economic data ahead the FTSE has opened just a few points in the black after a half decent session in Asian markets overnight.
The index found support around the 5720 level yesterday, which was its previous resistance area, proving to many of those using technical analysis that the old support and resistance theory can work.
The index spread trading market is at 5770 at the time of writing and whilst yesterday showed momentum for the bulls just taking a breather, this morning some tentative buyers are creeping back in.
The euro dipped back below the $1.3000 level against the dollar yesterday as a bit of risk was taken off the table across all markets.
This morning, however, the Asian session has given the single currency a little boost and EUR/USD has got itself back to $1.3030 at the time of writing.
Support and resistance is seen at $1.2970/1.2900 and $1.3050/1.3100 respectively over the near term.
Gold had a go at the $1680 level yesterday and continues with its upward trend, having bounced its way off support areas during its recent little run higher.
Our spread betting account holders remain bullish of the precious metal and will be hoping at some point of a return to the dizzy heights recorded last year around $1900.
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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Spread Betting 24 January 2012
Regulation after regulation has been announced by this Coalition government so far who are in danger of passing more legislation and new rules than many of the previous administrations.
The department of business’s slogan to “rip up red tape” looks seriously in danger of being moribund.
New reporting rules and more requirements to publish more information is only going to make private companies’ jobs harder. And this comes at a time when red tape is exactly what is supposed to be being curtailed in order to free businesses up so that they can attempt to grow.
It’s growth and job creation that are needed more than anything at the moment and not new rules on how someone should be paid if they are doing a responsible job.
It comes down to the anti-banker sentiment again with people still seething, and rightly so, from the problems that were caused back in 2007 and 2008. However, to prevent people from being paid bonuses, many of which are contractual, for doing jobs that most others would shun doesn’t give a great impression of UK plc.
This government has been trying to champion its drive to reduce red tape, but more and more we see it pandering to the electorate with sound bites as opposed to making the tough decisions.
A great deal of this can be said for the situation in Europe too which doesn’t seem to be getting any better, despite a renewed increase in investor’s appetite for risk.
This morning the markets are suffering from a little bit of profit taking after yesterday’s strength as we see the same old situation again.
We’ve seen it all before where negotiations in Europe run on longer than expected as bondholders and ministers can’t agree on a deal to reduce Greece’s debts.
Yet this doesn’t seem to be dampening the mood of the bulls all that much, who’ve started the year with a spring in their step with many indices spread betting markets having entered a technical bull market.
The likes of US stock market indices have rallied over 20% from their 2011 lows and the FTSE is 20% above it’s intraday low, but not yet 20% higher than its closing low, of last year.
European indices still have to record this recovery so to say we’re in a bull market may be premature. This could also be a false dawn however as we saw indices enter a technical bear market last year, so we can’t get too excited just yet as the see-saw for equities continues.
There’s little in the way of any economic data today with European PMI numbers, which are expected to show a slowing of the contraction for both manufacturing and services.
These will be followed by the UK’s Public Sector Net Borrowing, which is by no means a market mover but will be interesting to see if the expected decline is released.
On the currency spread betting markets, the EUR/USD pair remains firmly above the $1.3000 level but the bears are still out there. Figures are showing that there are more sellers of the single currency than there have been for a while so the recent strength seems to be attracting more bears.
It’s hard to believe that this move higher for the euro is more than a bear squeeze, but the longer we remain above $1.3000 the more the bears will doubt their conviction.
Carrying on with the bullish trend, gold got another boost yesterday, rallying $10.6 to close at $1676.7.
Demand was given a leg up by the slumping dollar, meaning that risk adverse investors were in search for an alternative safety haven amid the European uncertainty.
Chartists and those using technical analysis will be aware that the medium term trend has now turned sideways and the chart shows the 9 and 14 day moving averages crossing above the 40 day MA. At time of writing, the precious metal is seeing a small pullback and is trading down at $1672.0.
The main driver for crude oil prices yesterday was the announcement that the European Union will ban Iranian oil imports from July 1st.
This comes in response to Iran’s reluctance to halt its nuclear program and has put the energy sector on red alert. The Middle Eastern nation has threatening to close the Strait of Hormuz which allows around 20% of global crude to be shipped through.
The other factor driving prices higher was the weakening US dollar, meaning that crude looked like a good bargain to potential buyers. Currently, Brent trades up at $110.92.
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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Spread Betting 23 January 2012
The markets remain optimistic that the talks between bond holders of Greek debt and the authorities will reach an agreement, even though expectations had been that the talks would have concluded by now.
At the time of writing the FTSE is feeling quite perky this morning as it trades at a new year high around 5750.
Economic data is thin on the ground today so the main driver will likely be the action in Europe.
Of note though is EU consumer confidence which will be watched to see just how consumers on the continent are coping with the back drop of higher unemployment and continued sovereign debt crisis.
Later in the week things pick up a little on the data front and, crucially for the UK, the first reading of Q4 GDP is released on Wednesday. This is expected to show that the economy contracted in the latter part of 2011.
After a very strong week on the forex spread trading markets, the euro lost some ground against the dollar, as focus was back on the elephant in the room, which is Greece.
However, this morning an offer is on the table, which may not completely suit the Greeks but it has encouraged traders so we’re now seeing a euro rally.
The euro - dollar currency pair is trading higher at $1.2940 and with this little bit of momentum we could see this bear market squeeze continue further.
Also see, EUR/USD Spread Betting Market Rises Despite Struggling Greek Debt Talks.
Gold ended the week on a high as nervous investors wanted to hedge themselves ahead of a busy weekend with Greek officials looking to strike a deal with the country’s bond holders.
By the close of business, it had risen $7.7 to $1665.7, the highest move since December 12th, keeping the bullish momentum. Currently, things are still looking good for the precious metal which is trading up at $1669.4.
Alarm bells were ringing on Friday after the International Monetary Fund cut its forecast for this year’s world economic growth. This led investors to believe that demand for energy would plummet, sending the crude oil spread betting market through the floor.
No support was provided by the single currency either as there was no deal reached on the Greek’s debt burden.
At time of writing, Brent crude is up slightly on the day at $110.23 as the EU announces that it will enforce an embargo on Iranian oil from the 1st July.
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
Financial Spreads >>
"With FinancialSpreads.com you get all the normal
advantages of Spread Betting plus..." >> read
Financial Spreads review.
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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.
Article provided / approved by Financial Spreads which is a trading name of London Capital Group Ltd which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 182110.
'Online Spread Trading' edited by Simon Denham, updated 27-Jan-12
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