US Crude Oil Futures Rise as Greek Polls Boost Euro
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Spread Betting 29 May 2012
When is a bailout not a bailout? When the central bank takes all your debt on board and gives you unlimited liquidity in return.
Online spread betting markets are breathing a sigh of relief because, if the ECB bailout deal goes through, Spain will not have to raise more funds to prop up its ailing banking sector.
This unorthodox attempt to place a firewall around Bankia is another sticking plaster to put on Europe's wounds. For now at least, investors seem to like the idea.
The rulebook is being painstakingly ignored in a bid to save the Eurozone from collapse. However, many countries and investors are preparing themselves for what they believe to be an inevitable break up of the single currency.
The main problem is the precedent that this will set for other countries whose banks are in similar trouble.
Spare a thought for Ireland as they sit out on the far westerly part of the Eurozone. They have been taking their bitter medicine in order to get their house back in order.
At the same time, they have to sit and watch whilst other countries seem to be given extremely preferential treatment. Greece has had much of its debt written off and now Spain is seeing one of its biggest banks guaranteed by the ECB.
Yesterday the FTSE 100 struggled for direction amid low volumes, closing at 5356, as investors awaited further developments from the Eurozone.
Besides public holidays for a number of European exchanges and the US, it was the ongoing uncertainty regarding Greek elections that kept participants on the sidelines.
After all, the Greek election is widely agreed to be a significant downside risk for the UK and European economies given its potential domino effect.
This morning, European indices are back at the highs they rejected in yesterday's session, with the FTSE 100 knocking on the door of 5400.
Despite Spanish 10 year bond yields continuing to hover around 6.5%, the bulls seem to be in control as they are buoyed by the deal between Spain and the ECB.
Financial Spreads' clients bought into yesterday's reversal and they must be happy to see the little rally so far this morning.
The main test will be the near term resistance at 5400 and just above. Beyond there, the next resistance level for the bulls is seen at 5580.
Today's major highlight on the economic data front is US consumer confidence. This is expected to tick higher as petrol prices across the pond have declined a little, but this sentiment could be reversed by the recent fall in equity markets.
Yesterday's breaking news, that a pro-bailout Greek coalition is gathering momentum, sparked an early rally for the euro in the FX spread trading markets.
However, growing concerns over the Spanish banking system discarded that initial optimism, adding renewed downside pressure onto the shared currency.
In the end, the EUR/USD pair closed at $1.2539. At the time of writing, it is just benefiting from the lift in equities and is trading at $1.2560.
Gold traded in a tight range yesterday, finishing nearly flat at $1,574.4, as investors remained reluctant to commit too much ahead of Friday's Non Farm Payrolls report.
Although the precious metal seems to have stabilized over the last fortnight, after falling from around $1,670 in early May, it still hasn't given buyers a convincing reason to step in. We have yet to see any significant buying on the dips.
Stock markets provided very limited direction for the energy sector yesterday, so the price of US crude oil enjoyed a brief rebound on the back of a stronger euro.
However, it really was brief as fears over Spanish debt put the dollar in the driving seat and pushed crude oil back down.
Despite a very thin trading range, the session ended $0.25 higher at $91.11. Unfortunately it's too early to suggest that the bearish momentum has eased.
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'US Crude Oil Futures Rise as Greek Polls Boost Euro' edited by SD, updated 29-May-12
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