Stock Market Update 2 March 2012

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Stock Markets: 02 March 2012

Greece continues to dominate the financial spread betting markets as an agreement on the PSI is still yet to be completed.

Now the Eurozone has decided to delay half of the bailout funds in order to see that Greece does actually act and implement the austerity measures that they've said they would do.

Whilst the indices spread betting markets have recovered well from their falls on Wednesday this morning they have commenced with a little bit of slant to the downside. The mid 5900 area for the index remains a struggle and so 6000 still looks rather like a bridge too far.

We usually get the US non farm payroll on the first Friday of every month, but not so today so have to wait another week before we get that data.

Without the NFP there's little else on the data front to mention apart from the UK construction PMI figure due out this morning. This is expected to show a small rise and remain above the 50 level, but only just.



Stock Markets: 01 March 2012

There was a huge amount of excitement in the afternoon of yesterday's session as the markets were hit by a triple whammy from heads of central banks who indicated that the stimulus party is over.

The Governor of the Bank of England admitted to the treasury select committee that his asset buying program would not be renewed when it comes to an end in May.

The markets understand that the ECB's LTRO II that was rolled out yesterday is unlikely to be met by a LTRO III and then the bombshell from Ben Bernanke sent markets in a tailspin.

He was far more positive about the US economy than was expected, painting rather a rosy picture of the recovery and falling unemployment, but at the same time not being complacent.

This was a clear message to say that QE3 was unlikely in the near term and the markets got hit as a result, in particular gold which slumped 5%.

A lot of things happened yesterday including the Nasdaq Composite index hitting the 3,000 level which hasn't been seen since the massive internet bubble popped back in 2000.

Such highs are enough for anyone to bank a little profit and as Bernanke's upbeat comments reverberated around the markets sellers came out in force.

It's a strange reaction from investors who should be happy to hear such optimistic language, however we all know that much of this rally in equity markets has been built on the sustained stimulus from central banks.

When there's a hint that the good times of stimulus are over, then spread trading investors will check their exposure and readjust somewhat.

So as February ended with a bit of a bang March commences cautiously as the FTSE is trading a tad higher at 5870.

So far this year all the declines have been met by buying and we're still yet to see a proper shake out with a big move to the downside.

March is historically a bullish month for the FTSE 100 with eighteen gains over the past twenty eight years, but the declines when they have happened have tended to be quite large.

With the month favouring the bulls in the past, yesterday's decline might present yet another buying opportunity as they attempt to once and for all take on the 6000 level.



Stock Markets: 29 February 2012

Well this day only comes round every four years and so it's worth trying to make the most of it.

That's what the ECB will be attempting to do as they dish out another round of cheap loans this morning.

The markets leading into today's LTRO have traded sideways as investors remain apprehensive to exactly what the "big figure" will be. There has been much speculation of just what it'll mean for the spread betting markets if the amount is higher or lower than December's number of €489bn.

On the indices spread betting markets this morning, the FTSE is trading roughly flat at 5925 in anticipation as the last few sessions seem to have been building up to something. Maybe today is it?

The first round of loans was mostly taken up by Italian and Spanish banks so it will be interesting to see when the details are revealed just how much more these institutions helped themselves to this time round.

France was also in for almost a fifth of the loans and here again investors will want to see how much their banks, which were in the eye of the storm of the debt crisis until LTRO I last December, have borrowed.

UK government owned banks will also be joining the queue which should come as no surprise considering their poor results recently. They'll want to take advantage of the cheap funds to further their work in repairing their balance sheets.

Yet the main thing that hasn't happened as a result of all this liquidity is that there hasn't been any great trickle down to normal businesses and consumers.

It's all very well the banks repairing themselves, but it's the businesses on the front line that are crying out for the cash.

The problem is that we are in a vicious circle whereby banks are happier to horde the cash as opposed to lending it out and the same would probably be said for businesses if they did get the loans. They may perceive the risks to be too great in trying to invest and expand at a time when the economy is flat lining at best.



Stock Markets: 28 February 2012

The FTSE spread betting market is chirpier this morning, now having recouped almost all of the losses recorded yesterday.

Trading at 5930 at the time of writing, the bulls once again have shown their resolve in preventing a larger more to the downside.

They will most likely be keeping an eye on the resistance at around 5960 with half an eye on the psychological 6000 level.



Stock Markets: 27 February 2012

Over the near term the FTSE 100 has formed a double top around the 5970 level which is the major hurdle for the bulls at the moment.

The indices spread betting markets seem to have trended sideways for the last few days and weeks with the upside momentum looking to have dried up.

It's not a big surprise considering the good start to 2012 that we've had so far, markets don't continually go up in a straight line.

This morning the FTSE 100 spread betting market is just hovering above the 5900 level, down some 30 points as the G20 meeting over the weekend disappointed. The non European members of the G20 said to the European members in no uncertain terms, put up or shut up.

We still have the political stalemate in Europe whereby Germany's current leader will not get its bazooka out for fear of giving up further political ground to her opponents. She is already reliant on a coalition to pass votes on European bailouts.

Giving in and saying that Germany will stump up could easily cost Merkel the next German election in the autumn of next year.

But other nations around the world will simply not inject any more funds into the IMF in order to prop up the Eurozone when large parts of the region remain woefully uncompetitive and profligate.

This week sees a European summit that is aimed at putting these G20 members' minds at rest as Europe aims to finalise new fiscal rules. However, as we've seen in previous summits, there's no guarantee that an accord will be reached.



Stock Markets: 24 February 2012

Despite the grim numbers from the government owned banks, the FTSE continues to defy gravity.

A see-saw session yesterday ended with the index posting a mild gain and, in the US, markets were strong, which is filtering through to FTSE 100 stocks this morning.

At the time of writing the FTSE is at 5960 up some 20 odd points and key levels to keep an eye on are seen at 5890, 5855 to the downside and 5970, 6000 to the upside.

Even though spread betting clients remain cautious on the index, by still holding onto short positions, overall they seem to be going against the trend that insists on grinding higher. Day by day the 6000 level seems to be closer.

Today sees the second release of fourth quarter UK GDP data which as we know was in the red. It is expected to remain at -0.2% and the jury is still out as to whether the first quarter of this year will see another decline in growth meaning a technical recession.

We might just avoid this though, as not only have the markets got off to a better start than expected for 2012, but the economic numbers have been surprising to the upside too with better retails sales and PMI numbers.

Later from the US today both Michigan confidence and new home sales are expected to rise and often these can be market movers, so it's worth keeping an eye out for them.



Stock Markets: 23 February 2012

The FTSE 100 continues to hover just above the 5900 level, following a flat session in the US and Asian overnight, and the upside momentum simply seems to have dried up.

Financial Spreads' clients still seem to be positioning themselves for a bigger move to the downside and as the index fails to get beyond resistance levels, it's the support around 5835 and 5800 that will be more in focus.

Economic data today comes in the form of the German Ifo business survey which can sometimes be a bit of a market mover.

This is expected to rise just a touch and such a number will compliment their decent PMI numbers yesterday.

Later on we have the weekly jobless claims from the US which are due to just tick higher.



Stock Markets: 22 February 2012

The rally seems to have stalled for now as investors try to work out whether the Greek bailout is good for all of us or bad.

There are still doubts remaining as to viability of the plans and last night when US markets returned from their extended weekend, they seemed none the wiser as to how to play things either.

We had been calling the Dow to open above the 13000 level and it briefly flirted with this figure before giving up on the idea.

The uptrend for US and European indices spread betting markets remains in tact but just this morning there seems to be a little bit of respite for the bulls as they consider their next move.

The slow grind higher so far this year has been impressive and certainly caught quite a few people of guard.

Our spread betting account holders continue to sell into the strength, presumably expecting at some point some sort of more prolonged move to the downside.

There seems to be a degree of relief that the Greek issue seems to be finally coming to a resolution, but the bulls look like they might just be running out of puff for now.

The FTSE 100 spread betting market was in sight of the 6000 level earlier this week however it's been scared off, trading at 5920 at the time of writing. Whilst many investors still see equities as being cheap, they are showing reluctance to buy at these levels following the recent rally.



Stock Markets: 21 February 2012

With the US markets closed for President's Day yesterday volumes were thinner than normal and there's been little follow through from the Asian session this morning.

The FTSE is actually suffering a little bit of early weakness down some 20 points as investors make use of the odd adage buy the rumour (bailout of Greece imminent) and sell the fact (actual bailout finally agreed).

This is welcome on many fronts in that firstly the financial spread betting market can put this issue to bed for now and secondly we can talk about other things apart from Greece.

However, a deal with the private bond holders is still yet to be agreed and there are fears that any new government in April will simply not impose the austerity. Therefore, I have a nasty feeling that we may be talking about Greece again rather sooner than we had hoped.

As mentioned the FTSE is taking a bit of a breather this morning and understandably so considering the rally we've had so far this year.

There's no doubt that 2012 has got off to a decent start for equity investors and the European situation just seems to be improving somewhat.

Italian and Spanish ten year government bond yields are way lower than a couple of months ago at 5.40% and 5.07% respectively, a much more comfortable level for investors.

Greece has its bailout and there's a feeling that even if the Greece problem does return, by that stage Europe's debt problems will be greatly eased and contagion to other European nations will be less of a possibility.

It will be interesting to see how the US shares spread betting markets react when they get to work this morning following their bank holiday.

We are calling the Wall Street index to open some 55 points higher over the 13,000 level and a new high since May 2008. US investors might feel this is a little exuberant and bring their futures back down or they might think let's crack on higher as this rally continues.

There's still a feeling that at some point a sharper move to the downside is required in order to pre-empt the next step high in this rally. Having said that, the current grind higher looks to still have quite a bit of momentum behind it.



Stock Markets: 20 February 2012

Asian markets were boosted at the start of their session overnight following the news that China had eased their bank capital policy a touch.

This led to a big jump early on last night with our FTSE spread betting quote reaching as high as 5970. However, gradually throughout the Asian session the gains were handed back and we haven't opened nearly as high as was previously expected.

China continues to be a big driver behind sentiment and appetite towards risk as the world's second biggest economy remains critical to the future of global growth and expectations.

The authorities there are as desperate as everyone else to try and avoid a major meltdown or "hard landing" of their economy, so actions like this will help in avoiding a crash.

The move is lifting the usual suspects this morning with mining and energy stocks getting a boost. The FTSE is trading at 5934 at the time of writing with the bulls in the ascendancy, pushing the index to new highs for the year and a fresh six month high at the same time.

European indices are also being boosted by the prospect of the Greece bailout finally being rubber stamped today, which was one of the biggest threats to the current rally.

With this hurdle out of the way the bulls are thinking it could mark the next major step higher for the stock market indices as they continue their grind higher.

However, there are still considerable headwinds going into the next few months and weeks.

Not only are the economic concerns a continual worry, but the geopolitical ones too. Iran is stepping up its rhetoric against Europe by imposing oil export bans on the UK and France.

The latter country has up and coming elections in April, as does Greece, Russia and of course the big one in the US later in the year. A change to the political landscape might throw other spanners in the works or as a minimum add to the uncertainty.

So with all these other considerations it comes as little surprise to see that already this morning the markets have retraced from what was expected to be a much stronger open than what we actually got.


By Simon Denham, 2 March 2012


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