Stock Market Update 3 February 2012

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Stock Markets: 03 February 2012

So a flat start to trading today as the FTSE hovers around 5800. Only a few weeks ago many the consensus was that we were due to head lower, the technicals were looking incredibly weak and markets were going to plunge to new depths.

Almost everyone was bearish, which was the perfect signal to get long, and there were many clever people that did buy stocks in the final quarter of 2011.

Now it would seem there's a little bit too much bullishness out there as people are talking up the rally and people are pointing out the 20% recovery from the lows saying that we're back in a bull run.

It might soon be time for a move to the downside as there's a feeling sentiment might have just got a little too bullish. This is certainly what our financial spread betting clients seem to think anyway as they remain firmly in the bear camp, selling the FTSE index.

Today sees the US Non Farm Payroll number which is expected to come in at 150k.

This number has been good for the bulls over the past few months and encouragingly the rate of unemployment has dipped back below 9% to 8.5%. This is where it's expected to remain today, so all eyes on the US figure at 13.30 London time.

Last night Ben Bernanke reminded us that the US still faces many challenges to bring unemployment lower, which just kept US index gains in check.

Stock Markets: 02 February 2012

Markets staged decent gains yesterday as manufacturing numbers across the board showed encouraging signs that all is not lost in the industrial sectors around the world.

It was the strength of manufacturing in the emerging economies that really got the bulls excited where India's number hit an eight month high and China posted a decent gain.

Even in Europe, Germany and the UK saw manufacturing numbers that surprised to the upside and this overshadowed worse than expected employment numbers from the US. The positive data pushed the likes of the DAX 30 to new highs of the year and the FTSE a step closer to its 2012 highs.

Whilst manufacturing in the UK only makes up some ten percent of the economy, in the emerging economies it is a much bigger component and these are the ones that count as far as global growth is concerned.

The West is heavily reliant on the power houses of India and China to buy what little we export to them and they in turn are reliant on us buying the goods that they make as well.

There's always a flip side to any good piece of data though and for the likes of the UK and Germany the question is whether this uptick in manufacturing data can actually turn into new jobs.

Confidence about growth in 2012 is still pretty anaemic and so whether this jump can be sustainable or not is another question altogether.

This morning the strength from yesterday is following into today and the FTSE is now knocking on the door of its 2012 highs, just in positive territory at 5800.

The index is being assisted by merger and acquisition news from the mining sector as coal giant Xstrata has announced that it is looking to merge with Glencore.

Now that Xstrata's share price has finally opened it is over 10% higher in the mid £12 range and Glencore is up by over 3%. As a result, it's hard to see this being a merger of equals as their PR divisions are currently spinning it.

Clients have been caught on the wrong side of just about everything apart from gold in the recent move higher. They remain short of most rallying markets, whether that be the FTSE, the S&P 500, the euro or even some of the soft commodities.

Many people remain convinced that the strength seen in risk assets so far this year is going to be short lived, but slowly and surely the bears seem to be becoming the minority.

Stock Markets: 01 February 2012

We've seen so far this week a little bounce in confidence across the Eurozone and the UK, but this maybe just a reflection of the festive period and general New Year optimism.

Whether this can be maintained is very much up to whether inflation does carry on downwards and growth doesn't flat line.

As February gets underway the market seems to be carrying on from January, getting a little bit of a boost from some Chinese manufacturing numbers overnight so at the time of writing the FTSE is back above the 5700 level.

The trading ranges so far this year have been rather narrow, but overall indices spread betting markets have had one of their best starts to a New Year and this bodes well for the remainder of the year.

Our spread betting account holders don't seem to agree as they continue to oppose any strength, in particular on the US indices which have been marching higher.

Stock Markets: 31 January 2012

The first month of 2012 draws to an end and it's one nil to the bulls. The month has had its ups and downs but overall a bit of a bullish slant has taken many investors by surprise.

The FTSE is looking to post a gain of over 2% in the month whereas its European counterparts have had a much stronger month; the German DAX 30 is over 6% higher and the French CAC has risen by more than 4%.

This indicates a change in sentiment towards equities and a degree of confidence in the overall outlook for the wider economic picture. If equity investors are growing in confidence then their belief is that future prospects are brighter.

Yesterday we saw better than expected confidence numbers in Europe and this morning UK consumer confidence has complimented that by rising to its highest level for seven months.

Whilst this is encouraging we can't get too excited as these rises are from very low bases. In addition, today's UK data was compiled ahead of the GDP release which showed the UK contracted more than had been expected in Q4 of 2011.

But even if the GDP figures were known to those surveyed towards the beginning and middle of January, the fact is that inflation is coming down and is expected to fall sharply throughout the year. Consumers are always going to be happy about that and rightly so.

However bond markets, on the other hand, remain less optimistic as Portugal's borrowing costs soared yesterday and, even though Italy's bond auction was considered a success, their borrowing costs remained stubbornly high.

At the time of writing the FTSE is higher by 45 points or so taking it back above the 5700 level to 5715. The strength in US and Asian markets overnight is the main reason for the recovery and perhaps there might be a hint of window dressing as January draws to a close.

Promises of a conclusion of the Greek debt talks continue and remain in focus for the financial spread betting markets, as well as the Portuguese ten year government bond yield.

Stock Markets: 30 January 2012

A bit of risk off this morning as yet another EU summit gets underway and the Greek debt talks continue.

The lack of agreement between bondholders and the Greek government seems to have reached loggerheads and is unsettling spread betting investors as they take money off the table.

The FTSE has now dipped back below the 5700 level following a weak start that has gradually got weaker and at the time of writing we stand at 5680.

This move has taken the index below the previous resistance around 5720, which had offered a little bit of support last week, but now that's given up the ghost the next level of support is seen at 5650 and then 5600.

Economic data is thin on the ground today with the only one to watch being European confidence. This is expected to remain flat, maybe even tick higher, but we can't expect anything too exciting.

Stock Markets: 27 January 2012

This morning the markets are giving back some of their gains from yesterday as the rally in US stock markets fizzled out last night.

The retreat is seeing the FTSE open lower by some 20 odd points as the bulls take a bit of profit from the strong gains yesterday.

It was a real risk on scenario following the Fed's announcement that interest rates are due to remain at their record lows into 2014 and you can safely say that a similar thing might happen here in the UK.

The buyers piled back into mining stocks as metal prices soared with gold and copper prices spiking.

With the 5800 level being tested this is the near term resistance level for the bulls with 5815 just above here also a target meanwhile to the downside 5740 and 5700 are seen as support.

Our financial spread betting clients continue to sell into the strength in the FTSE and felt a little bit of pain yesterday however this morning at least the little bit of weakness comes as some relief.

Stock Markets: 26 January 2012

Markets are on the up this morning as they continue to see-saw with the boost this time coming from American shares.

Risk assets were in demand overnight as the US Federal Reserve said that interest rates across the pond are expected to stay at their current low level way beyond the previously expected time of mid-2013 and into 2014, most likely even the end.

The Fed continues to fear their ultimate dread of possible deflation in the future and so almost all of the members of the FOMC are calling for existing easy monetary policy to remain in place.

The fireworks set off last night were expected as it was the first time that the Fed used its new format for announcing its interest rate policy which is actually meant to make things more transparent and less volatile.

No matter which way they did it, over a longer press conference or a shorter one, the news that interest rates are to remain as low as they are for longer sent buyers into a bit of a frenzy.

The hints that there may be other attempts to prevent the world's biggest economy from going back into recession, in other words "QE3", also got the bulls excited and so US markets continued their march higher.

The S&P is now just under 4% off its 2011 high and the Dow is only a mere 1%. The Nasdaq 100 on the other hand has already surpassed its highs of 2012 indicating the true bullishness of US markets.

European indices have some way to go however as they lag their US counterparts and, even though we are higher at the open, the initial optimism following the spike in US markets last night already seems to be fading out.

The FTSE is at 5740 at the time of writing, attempting to recoup yesterday's losses, and the gains are being led by miners.

They are basking in the rally after the big jump in the price of gold and copper, putting those stocks in high demand.

Our spread betting account holders remain sceptical of the strength in indices, being largely short of the likes of the FTSE. The longer the rally continues, the more you have to think that at some point a bigger move to the downside is just around the corner.

So far though since the beginning of October last year when you think "this is it", the falls have failed to really follow through confounding the longer term bears.

Stock Markets: 25 January 2012

So in the build up to lots of economic data ahead, including UK Q4 GDP figures, the FTSE has opened just a few points in the black after a half decent session in Asian markets overnight.

The index found support around the 5720 level yesterday, which was its previous resistance area, proving to many of those using technical analysis that the old support and resistance theory can work.

The UK index spread betting market is at 5770 at the time of writing and whilst yesterday showed momentum for the bulls just taking a breather, this morning some tentative buyers are creeping back in.

Stock Markets: 24 January 2012

This morning the markets are suffering from a little bit of profit taking after yesterday's strength as we see the same old situation again.

We've seen it all before where negotiations in Europe run on longer than expected as bondholders and ministers can't agree on a deal to reduce Greece's debts.

Yet this doesn't seem to be dampening the mood of the bulls all that much, who've started the year with a spring in their step with many indices spread betting markets having entered a technical bull market.

The likes of US stock market indices have rallied over 20% from their 2011 lows and the FTSE is 20% above it's intraday low, but not yet 20% higher than its closing low, of last year.

European indices still have to record this recovery so to say we're in a bull market may be premature. This could also be a false dawn however as we saw indices enter a technical bear market last year, so we can't get too excited just yet as the see-saw for equities continues.

Stock Markets: 23 January 2012

The markets remain optimistic that the talks between bond holders of Greek debt and the authorities will reach an agreement, even though expectations had been that the talks would have concluded by now.

At the time of writing the UK 100 is feeling quite perky this morning as it trades at a new year high around 5750.

Economic data is thin on the ground today so the main driver will likely be the action in Europe.

Of note though is EU consumer confidence which will be watched to see just how consumers on the continent are coping with the back drop of higher unemployment and continued sovereign debt crisis.

Later in the week things pick up a little on the data front and, crucially for the UK, the first reading of Q4 GDP is released on Wednesday. This is expected to show that the economy contracted in the latter part of 2011.

By Simon Denham, 3 February 2012

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