US Crude Oil Futures Struggle as US Jobless Data Disappoints
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Spread Betting 27 April 2012
European markets continue to lag behind their US counterparts with the Dow Jones putting in another decent gain yesterday after nearly hitting a new high for 2012.
However, a downgrade to Spain's credit rating by S&P overnight has reminded the bulls of the headwinds that investors currently face.
Earlier this morning we had been calling the UK 100 to open flat at around the 5750 mark, but on opening we are actually in the red by some 30 points at 5710.
Spain's second cut to its credit rating this year is another shot across the bows of Europe's fourth largest economy.
Whilst equity markets are dipping this morning the country's ten year government bond yield is heading in the opposite direction. They are currently around the 6% level.
The problem is not just that Spain has a banking industry that's in so much trouble that it makes our banking crisis look like a picnic. They are also suffering from rabid unemployment, which is expected to rise even further. On top of this, their PM continues to insist that the country does not require financial aid.
The financial spread trading markets have heard this all too often and remain unconvinced. Similar claims were made by the leaders of Greece, Ireland and Portugal.
For now however, the bond yields have not spiked completely out of control and we're not seeing widespread panic.
So, as mentioned, the UK 100 is softer on the open. The index has been forming a bit of a downward trend in the past month and a half after hitting its highs for the year in March.
The trend sees resistance around 5790, which is the upper downward trend line, with other significant near term levels at 5830 and 5900. Meanwhile support is offered around 5635/00.
The trend looks like it could be forming a bullish flag, so a break to the upside might get the more bullish spread betting account holders excited. Having said that, a break higher is unlikely to happen today unless we see something spectacular from the US GDP figures this afternoon.
Market expectations for Q1 US GDP are for an annual growth rate of 2.6%, slipping from the previous reading of 3%. However, given the recent mixed economic data, economists' forecasts are spread over a wide range of 1.2% to 3.6%.
Whilst shares have benefited from global central bank stimulus, traders will be keen to see if any of this has actually improved the underlying growth.
With China slowing and the weaker European nations dragging the wider region closer to recession, the need for the US to maintain its moderate recovery becomes ever more crucial for the global economic outlook.
Despite rising to the highest level for more than three weeks, hitting $1.3263, the euro finished yesterday 12 points in the red at $1.3208.
The reason behind this was a cut in Spain's sovereign debt rating from A to BBB+ by Standard & Poor's.
It came as a reminder that Europe is still mired in financial troubles, with the so-called peripheral economies getting worse. This morning the EUR/USD spread betting market is in retreat at $1.3160.
After digesting the Federal Reserve's statement on monetary policy, gold buyers decided to step back into the market, pushing the price up by $11 to $1,654.90.
The spectre of a prolonged period of low interest rates in the developed world still offers good support for the precious metal.
Mixed economic indicators in the US and growing uncertainty for the European politics could also raise demand for gold as a hedge. This morning gold is at $1650.
Yesterday, the US crude oil market started under pressure as the figures for the US jobless claims continued to show a struggling employment sector. However, housing data improved investors' sentiment by surprising to the upside.
A rally in stock market indices also boosted US crude prices, which moved higher for a third straight session, adding $0.59 to a close of $104.55.
However, this morning's risk aversion has seen declines for crude oil futures, with US crude trading at $103.75 at the time of writing.
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'US Crude Oil Futures Struggle as US Jobless Data Disappoints' edited by SD, updated 27-Apr-12
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