West Texas Intermediate Crude Oil Futures Rise on Strong Chinese Manufacturing
Spread Betting 25 July 2012
The markets continue to spiral downwards as the prospect of a full blown Spanish sovereign bailout relentlessly rattles investors.
The Eurozone is slowly getting itself into a more and more perilous state. This is largely because the markets do not see growth any time soon and the austerity measures being imposed are crippling and counterproductive.
The sorts of austerity being imposed by Greece and Spain are far beyond what even the IMF itself recommends as the sort of level that will at least give the respective economies a chance to grow.
In the case of the PIIGS their recessions are due to become even more entrenched.
Whilst their profligacy of the past needs to be amended surely it doesn’t take much to see that the proposed measures are having the adverse effect.
As the economies continue to shrink, investors will be increasingly reluctant to lend. This is driving their bond yields higher and higher. The vicious circle of the Eurozone crisis continues.
Yesterday’s troika visit to Greece hardly went swimmingly either. It seems that it was nothing more than an exercise that proved that Greece has little chance of ever meeting its deficit reduction targets.
Things have not been helped either by the ECB’s recent move to no longer accept Greek bonds as collateral thus putting further pressure on the country’s central bank.
The markets have been clear that there was an exceptionally slim chance of the targets set ever being met. As each day passes, the likelihood of an exit appears to increase. For those in the Grexit camp, it is only a matter of time.
All this is putting a dent in investor sentiment. And things haven’t been helped either from the news across the pond that technology darling, Apple, have missed their earnings targets for the first time since 2003.
Apples results are on top of a string of disappointing results in the US which caused the Dow Jones to slip further into the red for the third straight session. Also see Spread betting on Apple shares.
Speculation that the Federal Reserve might act to boost economic growth allowed a late comeback but not enough to erase the early damage. Overall, the Dow Jones declined 100 points to close at 12,617.
This of course has had a knock-on effect for European trade this morning with the FTSE 100 index commencing the session in the red, down some 10 points to 5490. Although that is much better than where we had been calling the index earlier.
A highlight for today will be the UK GDP figures this morning. They are expected show a decline of 0.2% confirming a triple digit recession.
It’s not unreasonable to expect our economy to be suffering from the malaise of our biggest trading partners on the continent.
Investors are losing confidence in Greece meeting its debt targets. They are also fearing bailout for Spain. In addition, Germany was warned it might lose its much coveted AAA rating and that has put extra downside pressure on the euro.
As a result, it came as no surprise to see the euro losing another 54 points to $1.2061, a new multi-year low for the closing price.
This morning at least, there’s a little bit of a squeeze on the bears and we’ve already seen the single currency get itself back above $1.2100.
It seems trading in gold futures has turned a bit boring. Investors are largely undecided on whether to buy the metal and await the dollar depreciation from QE3 or sell it given a strengthening dollar.
Yesterday, we saw a modest rise of $3.60 to $1,580.2. Nevertheless, as mentioned in previous comments, the sideways movement dominates the view. At the time of writing the bulls are attempting to push the market higher as it trades at $1,586.
Following two days of heavy losses, bargain hunters made a cautious approach pushing the West Texas Intermediate crude oil prices 45¢ higher to $88.50.
Some extra help for the buyers might have come from news that manufacturing in China remains resilient. However, with the euro in freefall against the dollar, it could be a real struggle for buyers to stay optimistic about oil prices.
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'West Texas Intermediate Crude Oil Futures Rise on Strong Chinese Manufacturing' edited by SD, updated 25-Jul-12
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