Recession Concerns Weaken Crude Oil Spread Betting Market
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 10 January 2012
The strength from the indices spread betting markets this morning comes somewhat as a surprise considering that the rhetoric from European leaders seems to be focusing more on the possibility of a Greek exit from the Eurozone.
Whilst the drivers behind the new EU treaty maintain that a break up in any form is not desirable, they are starting to accept that Greece is a “special case” and becoming more and more likely to leave.
The optimism though is probably coming from the fact that Merkozy are hoping to bring forward the deadlines for agreement on the new treaty and have it all in place by March. In addition this would come with plans to stimulate growth as their “second pillar” part of the plans.
This is all very ambitious and there’s still a huge amount of detail that’s required to be fleshed out. Not least is the issue of how a new treaty will be enforceable when one of the EU’s biggest economies and contributors to the EU’s coffers is not taking part.
The hope of focus shifting away from Europe in 2012 has been quashed as investors continue to look at how various bond auctions and summits go as opposed to the economic data and corporate results which have been surprisingly positive.
US investors remain optimistic of a positive year for equities in 2012. For those statisticians out there, the chances of a rally in equities for the year have just been enhanced, at least from a historical standpoint, by the S&P 500 closing higher after the first five days of the year.
The Dow also continues to hold onto the ground above its 200 day moving average and looks poised to have a go at marking new highs. This comes following good numbers from Alcoa, despite being loss making, as the US earnings season gets underway.
European markets are being propped up US and Asian markets and one has to think that if it wasn’t for the European sovereign debt crisis the Dow would probably be forging ahead to a new all time high.
The euro strengthened yesterday against the dollar, which could be explained as some profit taking by traders on short positions. However, as stated yesterday, upside for the euro was always going to be short-lived simply because the Eurozone debt situation is nowhere near resolved.
Investment bank UBS say another reason that the dollar will become stronger against the euro, is because the US will reduce their dependence on oil imports and the faster growth will encourage investors toward dollar assets.
The euro is trading down this morning against the dollar at $1.2759, but we are still awaiting some news to come out of Merkel’s meeting with IMF head Christine Lagarde today.
With the prospect of a new recession rife on investors’ minds, the current trading view on the commodities spread betting markets seems to be pretty short term.
This means that any rally witnessed is shortly followed by a bout of profit taking, unfortunately not helping markets gain any ground.
Not only this, but outlook on the US dollar is an exciting one, with the American economy in better shape, limiting any potential gains in dollar denominated gold.
So after a small rally in the morning session, gold retracted in the face of the stronger US dollar, ending the day down $5.4 at $1610.9. Currently, the precious metal sits at $1616.4.
Much like gold, crude oil was hit by the concerns over another recession and the state of the Eurozone economy.
The only factor limiting the decline was the tension between Iran and the West as the Middle Eastern country made public a second facility for enriching uranium, while an American citizen was sentenced to death for allegedly spying.
At time of writing, there hasn’t been much action and Brent is trading up 40 ticks at $112.87.
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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'Recession Concerns Weaken Crude Oil Spread Betting Market' edited by SD, updated 10-Jan-12
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