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Stock Markets: 06 January 2012

The last final salary pension scheme provided by a FTSE 100 company comes to an end today as Shell closes its policy of providing new employees with a guaranteed pension.

This is a significant move which is the last of almost all pension schemes provided by the private sector, meaning that many more private sector workers now have to go it alone.

It's not as if Shell's pension fund has been in trouble, as it was one of the best funded schemes out there and will have no trouble in keeping up with payments when their existing members retire. However, it goes to show that even Shell is unwilling to take on the liability of such a strain on their balance sheet going forward.

With an ageing population we all know that we're going to have to work longer and probably for less when we come to retire, which for now the majority of the public sector is unable to appreciate.

Even the proposed reforms, if they are accepted by the unions, do not save the government anything substantial because of the concessions they have had to make. And of course in a few years time the issue will have to be looked at again.

It's a contentious issue that's causing unrest within the public sector but gradually it looks like many within the sector are coming to terms with the fact that the government has no money. It has to make savings and bring these pensions in line to some degree with the private sector in order to make them sustainable.

We'll see more and more private sector schemes inevitability follow in this direction and in time the UK consumer will gradually turn into more of a saver than a spender. Unfortunately this isn't ideal for the economy in the long run as it relies so much on us spending.

The FTSE was being called to open higher than we've actually commenced the day following the close of the Dow last night which managed to hold onto its levels. However, overnight both the US futures and our FTSE quote have been dragged lower by weak Asian markets.

At the time of writing we're some 15 points higher, so slightly better than the opening calls would have suggested, but not exactly steaming ahead.

The FTSE remains tentatively above its 200 day moving average, having broken back above there at the beginning of the year. Whilst this is meant to be a signal for further strength, we saw a similar break above here in October which was not sustained.

The Dow on the other hand has been above its 200 day moving average since just before Christmas but continues to be kept from making any further gains as Europe drags at its heels.

The DAX 30 is still 300 points below its own 200 day moving average and so lagging substantially and until it makes a concerted move to the upside, gains for the likes of the Dow and FTSE could be limited. Of course we all know what's needed for the DAX to catch up.

Stock Markets: 05 January 2012

Index futures markets are expected to track sideways this morning as investors continue to cast doubt over the strength at the start of this week and year.

A little bit of doubt crept into investors' minds yesterday after the ECB revealed that a record amount of funds had been deposited with them overnight and the share price of Italy's largest bank hit its lowest level since March 2009.

The fact that such a huge bank is struggling to recapitalise after the ECB pumped all that money into the markets only a couple of weeks ago raises the same old fears about the Europe wide banking system.

We may be in a different year but we face the same problems in 2012 as we did in 2011 and even Germany isn't immune to being targeted.

Yesterday their bond auction was well subscribed but the yield just crept upwards. Today the bond auctions continue with the focus being France.

Europe's second biggest economy is under the spotlight today as they face exactly the same problems as the peripheral countries. France suffers from too much debt and a slowing economy, at a time when they are introducing austerity measures of their own.

Their triple A credit rating is also under severe scrutiny from the rating agencies who have already fired some shots across their bows at the end of last year.

A downgrade would be the next step towards the slippery slope for France as it would cause their borrowing costs to spike, making their job of getting the house in order even more difficult.

Investors will also want to hear how much was deposited at the ECB overnight just as they have in recent days. This is becoming another focal point for the spread trading markets as it is acting as a bit of a fear gauge.

The more cash held with the ECB earning nothing at all, the more worried banks are about their own counter parties.

Out of all this, the UK continues to benefit as our own gilt market benefits from risk adverse investors helping to drive the yields on those bonds lower.

A good result for the Coalition who pride themselves on our low borrowing costs, which are almost as low as Germany's and indicate the confidence in their austerity plans.

Stock Markets: 04 January 2012

The rally that markets have enjoyed so far this year looks to have come to an end as investors look like they might have just got a little ahead of themselves.

The calls on the open are to see a mild decline for the FTSE and its European counterparts as a little bit of weakness crept in overnight in Asia.

You can't expect stock market futures to continue going up in a straight line forever and the start so far to 2012 might have been a little too bullish for some people.

Today people will be focusing on a German bond auction with hopes that it'll go smoothly and the yields demanded by investors will not exceed those of the UK which they did briefly last year.

With lots of bond auctions going ahead into the New Year this will be one of the themes going forward and investors will be keeping a close eye on this side of things.

As well as all the debt that needs to be refinanced by European countries there's more summits and meetings between European leaders, although for now there's been little focus on the next one so far this year.

This could be seen as a good thing for many as the markets seem to be settling and there's no summit to worry about for now.

US markets have continued to storm ahead with the Dow Jones showing particular strength. The index is well above its 200DMA and, whilst many people claim this move higher is part of a broader bear market rally, few are speculating against losses for US equities which are proving much more resilient than European indices.

Yesterday's move by the FTSE brought it back above its 200 day moving average, whereas the German DAX 30 still languishes some 300 points below its.

These remain testing times for equity investors where the bulls continue to claim that there's plenty of value out there to be had. For investors that remain hungry for returns and yield, stocks do remain an attractive asset.

A bit of economic data today from Europe and mortgage approvals from the UK are expected to show continued low levels. The highlight of the day from a data standpoint though is the prelude to Friday's Non Farm Payroll as the ADP private payrolls are released.

There are clear signs that employment in the US is accelerating as the weekly initial jobless numbers have been ticking lower and lots of the other economic surveys have been better than expected. Today's number is due to show another healthy increase in jobs created by some 170k.

Stock Markets: 03 January 2012

2012 has got off to a flyer with the FTSE recouping almost half of its annual losses on the first day of trading.

Yesterday a few European indices such as the DAX and CAC were open and they started the New Year with aplomb, being boosted by stronger than expected manufacturing data across the continent. Indices have been boosted further overnight by a good Chinese PMI number to kick things off.

Buyers have piled into mining stocks this morning as a bout of increased risk appetite sweeps through the markets as the FTSE plays catch up.

Those who have read many of the headlines this morning will be forgiven for thinking that the year would start on a down note. Report after report suggests that people in the UK are expecting more than before for the economy to dip back into recession.

Confidence remains beaten up and the high street has suffered further blows with retailers under pressure.

Even though the PMI data released across Europe yesterday was better than expected, it still remains well below the 50 level suggesting contraction and a recession across the continent is possibly even underway as I write.

The New Year also kicks off with quite a bit of economic data with the UK's own manufacturing PMI data which is expected to fall further below the 50 level. However, don't be surprised if this comes in slightly better than expected following on from yesterday's good numbers in Europe and overnight in China.

Then we get the same data from the US, including construction spending numbers, which unlike their European counterparts are expected to show the US economy continues to ride the storm.

Stock Markets: 29 December 2011

Low volumes will very much be the dominant theme for this week. With this in mind, we can possibly continue to expect quite 'whippy' and volatile trading sessions.

There are a number of figures out today, mainly of a US flavour. Most notably, we have Initial Jobless claims, Chicago PMI and pending home sales. Given that it was the US session that kicked the markets in to life yesterday, it is well worth keeping this in mind for today too.

In stock market trading, the FTSE is currently trading around 5512, which puts it pretty flat on the day, up 12, and very close to where we were at the time of my commentary yesterday.

We therefore still wait to see whether the FTSE can record a gain for this month, with 2 trading sessions to go (including this one). 5500 is quite a pivotal level in the FTSE, and acts as a strong support/resistance level as the market breaks above or below it.

Stock Markets: 28 December 2011

With so little on the economic calendar and few markets open yesterday any ones that were drifted sideways.

Despite tremendous US consumer confidence data which came in much higher than expected, this was not enough to lift US markets even on the thin volumes.

What was encouraging to see was that the level it got to is almost as good as it was a year ago so it would seem that the US consumer has got over the budget battle and resultant credit rating downgrade of a few months ago.

The theme of this week is one of low volumes and certainly in the case of today with minimal economic data. This gives time for those that are in the office to look back and reflect on the year.

2011 will be remembered for many things, but as far as the markets are concerned it's the escalation of the European sovereign debt crisis that has dominated throughout. From the bailout of Portugal to the sights being set on Spain and Italy. Unfortunately the focus will remain on these bigger European nations who have so much in the way of debt to refinance in 2012.

The FTSE 100 market is bang on the 5500 level at the time of writing, so a little to the downside with mining stocks dragging somewhat.

The Asian session overnight has done little to inspire the futures markets. With two trading sessions left after this one, the battle is on for this December to record a gain for the month, let alone attempt to push the FTSE a little higher ahead of the year end in a bid to lessen the poor performance of the index this year.

By Simon Denham, 6 January 2012

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