UK Market Trading

The Late Afternoon Market Update.

Spread Betting 24 May 2013

Heading into the close, the FTSE 100 is down 25 points, looking set to end the week on a down note.

For the first time since mid-April, the FTSE 100 is going to end the week lower than is started.

Despite a brief foray into positive territory this morning, the selling has resumed this afternoon with US markets doing the opposite of last week and dragging the FTSE lower after the open.

It has been a sentiment-driven day, data being thin on the ground.

Even if there had been more economic data, the session would probably still have seen substantial selling.

Investors haven't become fundamentally more bearish on the economy, as they were already fairly cautious about the outlook.

What has changed is that we are finally seeing selling in noticeable amounts, after a long period when buying was the only game in town.

Investors are now worried about the end of QE, and no-one wants to be left without a chair when the music stops.

US Stock Market Update

Durable goods orders provided a brief ray of sunshine in the US, rising by 3.3% for April, a much better figure than forecast.

The positive effect was short-lived, however, since we seem to be reverting to an environment where positive news is a reason to sell, as it prefigures an earlier end to QE.

Since late November, when the latest leg of this rally really began in earnest, there have been three periods of heavy selling; the fiscal cliff fear in December, the Italian election panic in late February, and the Cyprus bailout of mid-April.

Only time will tell whether the 'tapering panic' of late May will turn out the same way as the others.

Forex Market Update

Minutes from the latest Bank of Japan (BoJ) meeting are released on Sunday, along with a speech by Governor Haruhiko Kuroda.

Markets may begin to question whether the BoJ can really continue with its programme, leaving Mr Kuroda with no choice but to press on.

The bank has a freedom to act that would make others green with envy; with the world looking on, it would be a shame if they wasted the chance.

USD/JPY might still be looking to probe the ¥100 level, but there is too much at stake for Japan to see this trend falter.

Commodities Market Update

A stronger dollar continues to be the theme, and this is causing more selling in commodities.

Of course, if the theory of a strengthening US economy comes to pass then they might manage to rise despite the stronger dollar.

A rising tide lifts all boats, and a healthy US economy would give everyone else a boost as well.

For now, $1,400 remains the level to watch in gold, gains having stalled here throughout the week.

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The above comments do not constitute investment advice and neither IG Index nor Clean Financial accept any responsibility for any use that may be made of them.

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'UK Market Trading' edited by AG, updated 24-May-13

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