UK Market Trading
Spread Betting 23 May 2013
Heading into the close, the FTSE 100 is deep in the red, down over 150 points, after a day of heavy selling prompted by a clutch of worrying news.
It is time to pull out the term 'a sea of red' to describe the day's market action.
It has been quite a while since we've able to describe a market in this way, but the snowballing of selling that has characterised today aptly fits the description.
European markets have taken one look at the Chinese PMI and the Fed minutes and have decided that they do not like them one little bit.
However, now is the time for rational heads to prevail.
A sober look at the market action today shows that we are still up 13% for the year.
Given that the average performance for the year as a whole within the period 1984-2012 is 7.4%, investors could walk away from this market for the rest of 2013 and still be pleased with their performance.
Even with a 2.4% decline today, we are only back to levels seen last Friday.
In the context of a rally that has powered higher since late Autumn 2012, the loss of a week's gains is small beer.
Drinks titan SABMiller has had the misfortune to publish results on such a day, but investors should still be heartened that the company's growth in Latin America and Africa continues to power ahead.
SABMiller has roundly outperformed rival Diageo so far this year, and the solid nature of the business means it could well shake off this brief weakness well ahead of the broader market's recovery.
US markets are not showing the same inclination to drop sharply as seen in Japan and Europe, which will give the optimists some hope that the latest dip will prove to be as short-lived as all the others this year.
Today's stronger home sales and jobless claims were the last thing markets wanted to see, since they would fit with the idea that the US economy is approaching a point where a reduction in stimulus is appropriate.
This neatly illustrates the irony of the position; traders across the world are openly hoping for poor US data since this keeps the Fed involved.
Much now hangs on Non-Farm Payrolls, but these are still two weeks away.
In currencies trading, the dollar is undergoing an unaccustomed period of weakness against the yen, dropping back below ¥102;.
However, as with the moves in equity markets, the uptrend in USD/JPY does not yet look to be seriously under threat.
One Fed meeting and one Chinese manufacturing PMI reading does not change the entire outlook, especially in trends of the strength and length seen so far in the year.
Recent events will only serve to embolden Mr Abe to keep his foot firmly on the stimulus pedal.
Commodities Market Update
A stronger dollar is taking a heavy toll on crude oil today, in both its Brent and US crude formats.
This only serves to illustrate the irony of the situation still further; US economic data is getting better, yet the life-blood of the American economy, crude oil, is dropping in price.
Such is the madness that QE has wrought upon the market.
Meanwhile gold and silver are rising modestly, their current gyrations for once outshined by the volatility in equity markets.
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'UK Market Trading' edited by AG, updated 23-May-13
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