Spread Trading 28 Jul 09
Spread Trading 28 July 09
The market’s relentless march continues higher this morning assisted by a last minute recovery in US markets last night. Although at one point the US threatened to end the incredible run we have seen recently.
US data assisted the move higher after new home sales recorded their largest monthly rise in eight years.
At the time of writing we are above the 4600 level, up some 20 points. As has been widely reported yesterday and today, if we end the session higher the FTSE would have recorded its longest run of consecutive gains ever since the index was established in 1984.
Despite the records and the relentless rally spread betting clients continue to sell into the strength. There was a brief moment last night when we saw a few buyers creep in, but the higher the FTSE goes, the more investors expect a sharp pull back. The bearish clients are out numbering the bulls at the moment.
The adage “the trend is your friend” is certainly not being adhered to by clients at the moment.
While we wait in anticipation to see if the FTSE has enough momentum to break its record, today’s major piece of economic data is comes in the form of US consumer confidence figures.
With the housing data looking like it has turned the corner in the US and stock prices remaining on the rise, it wouldn’t come as much of a surprise to see the number come in higher than expected, particularly since the consensus is that it is expected to decline just slightly from 49.3 to 49.0.
Certainly in Europe we are seeing a much more upbeat consumer as yesterday saw German consumer confidence numbers rise for the third month in a row.
Indications that the consumer is starting to come back out of its shell are encouraging and will certainly go some way to help assist with a recovery, however if consumers read too much into the green shoot argument then their confidence could act as a catalyst to inflation which, along with rising unemployment, is the biggest concern for all of us in six months to a year from now.
On top of this the price of crude oil is on the way back up with Brent above $71 and Nymex not far off $69.
Although this is half of the high we saw last year when oil prices spiked to $140, it will only add to inflationary pressures.
Oil markets are testing their highs for 2009 and for the time being seem to be looking forward to Friday’s US GDP number. Before then we have American Petroleum Institute data later today and tomorrow’s usual weekly inventory number from the EIA.
BP’s good run higher since the beginning of July has be halted this morning after announcing its large decline in profits. That hardly comes as a surprise. They are not only seeing less demand for their product but they are getting half the price for it compared to 12 months ago.
BP’s rival Shell announces their figures on Thursday and are higher this morning whilst BP is lower. There seems to be a little shift from BP into Shell this morning. Shell has underperformed so far in 2009, down some 11%, whereas BP is nearly flat on the year.
There has been little to report on the currency front of late as prices continue to swing neatly within small ranges.
The interesting thing is that sterling has been a beneficiary of the recovery in stock prices since March. Nevertheless the recent rally in equities has done little to boost the currency further.
GBP/USD remains capped by the $1.6600 level and sterling/euro, whilst supported by the $1.1500 mark, cannot seem to shift above $1.6650.
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'Spread Trading 28 Jul 09' edited by SD, updated 28-Jul-09
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