Weak German GDP Data Weighs on Indices Spread Betting Markets
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The regular Financial Markets Update from Simon Denham of Financial Spreads.
For today's update >> Financial Markets.
Spread Betting 16 August 2011
Weaker than expected German GDP data has put some pressure on the financial markets this morning.
This data is particularly troubling given that much of Europe is relying on Germany to help them through the economic problems they are currently facing. Any indication of a slowdown will not be taken well by the financial spread betting markets.
For more on the weak German GDP numbers and their impact on both the Euro and the Dax please see our feature, German Dax Struggles as GDP Data Inspires Fear of a Slowdown.
Shell have managed to blot their copy book with a minor leak in the north sea that would, probably, have gone pretty much unreported if the Deep Water Horizon disaster had not occurred.
As it is we can expect finger wagging and possibly more regulatory oversight which will further push up the cost of exploration/extraction. Shell's share price is off about 30p this morning in line with the general market falls (0.5%) but we may find margins under yet another compression.
Volumes yesterday were pretty low as the markets attempted to drag themselves out of the mire and many commentators have been expressing the view that this is a weak indicator.
The argument revolves around the idea that if investors were truly convinced that a low had been reached then there would be a significant volume of Bottom Pickers looking to pick up stock at good returns. This is not to say that they would be right, just that there would be sentiment to buy.
As it is investors are, quite naturally, a little shy of leaping back into a market that has just cost them a pretty packet. The problem is that while people admire Mr Warren Buffet's 15 year investment cycle, hardly anyone can actually live with it.
Immediate losses are, well, losses and it takes a strong nerve to hold on both when you are losing and indeed when you are winning. We are actually seeing our spread betting clients more comfortable buying today than yesterday so there may be a bit of support around at least in early action.
The FTSE is currently back just below 5300, bang on the strong support level mentioned yesterday, 5295/5300. Should we get significantly through this then technical analysis traders will be looking for 5210/25 as the next target.
If the support holds, there is weak resistance at 5320/25 and then up at yesterday's closing area around 5355/60 to 5370/75 where we foundered for much of yesterday's session.
The US markets were quiet yesterday, only a 200 point range for the Dow, giving up at just below 11500 before retracing to the current price of 11360.
US stocks are currently looking a bit pricey versus the Europeans so it would not be a total surprise if there was some underperformance over the coming weeks/months. Support remains at 11320/30 but we have staggered sideway through the short term rising trend below here is 11270/80 and then 11215/25.
The Sterling – Dollar spread betting pair has fallen on the poor German GDP data and has now given up much of yesterday's rally at $1.6330.
The support at $1.6300/10 is actually quite strong but below here we are looking at $1.6235/45 and $1.6085/95. On the up side, the big level is $1.6480/90 where we have run into a brick wall a number of times over the last few weeks.
Virtually anything over $1.64 is a struggle to hold onto but if we do then sentiment may well turn heavily in Sterling's favour.
Gold remains the asset to own. As mentioned the trend has been accelerating in recent weeks and both Bulls, and future Bears, will be looking for a 'blow out' day soon to indicate a near term top.
As indices weaken, the money continues to pile into gold, the Yen and the Swiss Franc. At some point this will all go wrong so it would be unwise to ‘bet the house’ on it but while the impetus continues it is just as foolish to try to stand in the way.
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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'Weak German GDP Data Weighs on Indices Spread Betting Markets' edited by SD, updated 16-Aug-11
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