UK 100 Index Spread Betting Market Looks For Second Best Monthly Gain
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 28 October 2011
There’s been something of a buying frenzy on the indices spread betting markets in recent days.
It hasn’t been solely down to optimism in the run up to the EU summit and the continuation of that following Wednesday’s negotiations, but corporate earnings have been relatively strong on the whole.
Throughout the crisis and the market sell off in August, companies have remained in decent shape, I’m talking about the bigger blue chips, with lots of cash and waiting to pounce when the situation looked to be improving.
Even though many economic indicators have been turning sour at the same time, the bigger companies have been able to weather the storm and this earnings season have come out smelling rosy.
Once the elephant in the room had been dealt with, even if many see it as a temporary fix that’ll have to be readdressed in a couple of years time, the focus is back on corporate earnings and economic data.
On top of the decent round of earnings, yesterday saw some good news from the US on the growth front.
Despite a poor consumer confidence data earlier in the week yesterday’s GDP data was a welcome number and showed that the US economy had finally exceeded its pre recession level of growth.
The fact that the recovery has taken longer to achieve this feat than any other since the Second World War shows just how deep the 2008 recession has been.
There’s still a long way to go though and it certainly doesn’t guarantee that better times are ahead.
Unemployment still remains incredibly high in the world’s biggest economy as the slow recovery has not been enough to create a significant amount of jobs.
In contrast to the UK and much of Europe, where people are deleveraging, spending less and building up their savings, in the US they are dipping into those savings to fuel their tireless appetite to consume. At some point those savings will run out.
Next Wednesday, when the Federal Reserve announces its latest interest rate decision, investors will be listening keenly to see what their take is on the jobs situation and whether they’ll announce further stimulus.
This morning the UK 100 index is adding to the gains of recent days and is well on track to record its second best monthly gain ever.
A remarkable feat when you consider that at the beginning of October there was a feeling that we might see yet another typical mass sell off as we have so often in the past.
The first few days started very nervously as the UK 100 fell 3.5%, so if we hadn’t seen that then we’d probably be saying we’re on the verge of recoding the best monthly gain in the index’s history.
This morning the index is happily drifting higher trading at 5744 as the appetite for risk remains insatiable.
The appetite for risk boosted the single currency way beyond the expectations of many as EUR/USD went from strength to strength. The forex spread betting pair smashed straight through $1.4000 to get to the dizzy heights of $1.4200.
This morning a little bit of profit taking is the order of the day with EUR/USD trading at just a tad below its highs around $1.4195.
The slide in the US dollar against the single currency helped accentuate the price of gold, which drew in bargain hunters as they transferred their cash in to high yielding assets.
One thing that could have been playing on trader’s minds was the fact that this bout of extra funds could actually be seen as disguised monetary easing, meaning future inflation.
We all know what investors believe is the best hedge against inflation when interest rates are low.
All in all, the yellow brick added $19 to its price, closing at $1744.7 and, at time of writing, investors seem to be taking a breather, with the commodity down a tad at $1739.3.
As with gold, the energy sector had its fair share of overexcited buyers yesterday, as traders revelled in the news from the EU leaders meeting.
The fact that equity markets were flying and the dollar was slumping helped the crude oil spread betting market rally. To add to the good vibe, the decent US GDP figure punctuated the rise in crude given the bigger oil consumption.
As the trading day came to a close, Brent was trading at $112.19 and at the time of writing has received a small chip off the top, as it trades at $111.71.
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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'UK 100 Index Spread Betting Market Looks For Second Best Monthly Gain' edited by SD, updated 28-Oct-11
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