UK Spread Betting Investors Concentrate on 2012 Budget
Spread Betting 21 March 2012
With the focus in the UK being on the Chancellor today it will also be on the gilt market to see how bond traders receive his annual budget.
The leaks suggest that in an attempt to appease to his coalition partners he is going to raise the lower tax rate band and pay for it by cutting down on tax avoidance and introducing a mansion tax.
The move to raise the level at which tax is first paid on income is a costly move and has to be paid for somehow, which in some part will come from a new tax of expensive homes. However, the Chancellor also has a little wriggle room in that he is ahead of his deficit reduction targets.
These are the headline grabbing measures that are due to try and cover up a reduction in the 50p tax rate next year.
Here the plan to introduce this in a year's time rather than right now is simply going to make many of these top earners defer their income into next year so they pay the lower rate then.
So if he wants the cash now then he'd be better off cutting the rate now and at the same time sending that message to business leaders and enterprise that the UK will reward success.
On the other hand there are the arguably more important measures that don't tend to get the headlines as they aren't the vote winners/losers.
Corporation tax, which the Chancellor announced reductions of a year ago could once again be reduced in an effort to attract businesses and encourage start ups.
All these measures cost money and so we can also expect some more spending cuts to be thrown in.
As mentioned the bond spread betting markets will be the ones to watch to see whether traders believe the Chancellor can afford these things and keep on track with his deficit reduction plans.
At least there'll be one other bit of bright news in the form of an upgrade to growth forecasts from the Office of Budget Responsibility, a whopping revision upwards from 0.7% to 0.8% for the year.
The FTSE 100 index has opened flat this morning following yesterday's little sell off and at the time of writing is hovering around the 5900 mark.
Yesterdays sell off looks to have been a buying opportunity for the bulls, but with the index continuing to fail around the mid 5900s and yet to break through 6000 the bias looks to be in favour of resistance levels.
On the one hand investors have to consider the fact that now even mining stocks are voicing their concern about the Chinese economy, but on the other the US is still showing signs of a recovering economy that could be sustainable.
These two counteracting factors are causing the indices to go sideways.
Whilst the eyes of UK spread betting investors will be on today's budget, this morning we do get the release of the Bank of England minutes as well as Public Sector Net Borrowing.
PSNB which fell last month as annual tax receipts came in more than expected is due to show a rise today as government spending is due to ramp up ahead of the end of the tax year.
For the BoE minutes, which showed a widening split in the MPC last time round with a 7-2 vote, it will be interesting to see whether that dove-hawk split has got wider.
Then later on we get existing home sales from the US which is expected to continue higher in a similar fashion to how it has been so far this year.
On the FX spread betting markets, the bounce in risk assets this morning is assisting the euro which is higher so far in today's session.
EUR/USD is at $1.3255 at the time of writing having been a little higher already. The recent little uptrend just seems to have come up against resistance around $1.3290 which is where the pair failed earlier in the month.
There was concern earlier in the week about rising Portuguese bond yields, but yesterday those concerns were out to rest as the yields fell back.
The gold spread trading market still hasn't seemed to get back into rally mode yet even though a little dollar weakness has set in recently.
At $1653 this morning the yellow brick just can't seem to attract the buyers back following its sharp falls.
As it continues to hover below its 200 day moving average, a seed of doubt about the longer term upward trend might growing in the mind of the bulls.
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'UK Spread Betting Investors Concentrate on 2012 Budget' edited by SD, updated 21-Mar-12
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