Stock Market Update 3 May 2013

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Stock Markets: 03 May 2013

European equities are set to open flat as investors consider how to trade today's Non-Farm Payrolls number from the US.

Following the surprise slump in March, traders will be looking to see if that was a one off or whether it was the start of a sustained slump in jobs growth.

Only yesterday, the Fed criticised the US government for hampering growth with its sequester and said that thinking tax rises and spending cuts wouldn't hurt the economy would be akin to believing in financial alchemy.

Also, like the March figure, this weeks APD figure has come in below expectations, once again stirring suspicions of a weaker Non-Farms number.

However, with the Fed on standby to increase asset purchases should the economy require it, would a weak figure be bad for equities?

Whilst central banks and online spread betting markets continue to recreate something from 'the Emperors New Clothes', with Ben Bernanke parading around handing out cheap money, traders seem able to shrug off almost any weakness.

Improved confidence saw the Dow Jones rally 110 points to 14,818 after the ECB signalled its determination to drag the Eurozone economy out of ongoing recession by cutting rates.

However, US markets had additional reasons to be cheerful, with the number of Americans filing claims for unemployment benefits dropping to a low last seen in January 2008.

Nonetheless, the renewed optimism will have to be confirmed by the Non-Farm Payrolls data which is expected to show a rise of 146,000 jobs.



Stock Markets: 02 May 2013

European stock markets are set to open lower this morning, tracking overnight declines in the US and Asia.

Unfortunately, the FOMC statement was something of a non-event.

Markets had been hoping that the run of disappointing US economic data would be addressed with some nudge towards looser policy.

However, the sentence 'The Committee is prepared to increase or reduce the pace of its purchases' indicated that the current weakness isn't enough.

With no immediate ramping up of stimulus, US markets edged lower as it seems that the economy will have to deteriorate further before the Fed steps in again.

Today is the turn of the ECB and, whilst an interest rate cut is largely priced in, the markets could well be disappointed again.

Like Ben Bernanke, Mario Draghi is likely to suggest that the central bank is reaching the limits of its abilities, calling on those responsible for fiscal policy to do more. This is exactly what the financial spread betting markets don't want to hear.

Markets will not be buoyed by central banks putting the fate of their economies in the hands of bickering bureaucrats whose austerity measures and reforms are threatening their own careers.

Instead, markets will be hoping for an indication that some 'non-standard measures' will be on the way to provide immediate relief.

During the early part of yesterday's US trading session, a drop in the ISM factory index combined with a slowdown in ADP employment figures to weigh on equities.

Later on, the FOMC meeting did not bring anything new, with the Fed maintaining its asset buying to spur growth.

Finding no reason to be cheerful, investors decided to take some profits off the table and sent the Dow Jones 136 points lower to 14,703.



Stock Markets: 01 May 2013

With most of Europe taking the day off, UK equities are set to open flat as traders tread water ahead of key central bank meetings.

With only the UK in action today and the crucial FOMC statement coming after the close, today's trading is expected to be light and directionless.

The UK's Manufacturing PMI is set to be neither here nor there as it's expected to show that the sector remains marginally in contraction.

The first of May, also known as Labour Day or International Workers Day, is particularly pertinent this year given yesterday's unsurprising all-time high in Eurozone unemployment, rising to 19.2 million.

In better times it was an ode to the efforts of the individual worker. However, as growth continues to stutter and austerity continues to bite, today is set to be a day of protest from the growing ranks of those who can't find work.

Despite the weak economic backdrop, stock markets have continued to cautiously advance and this is in no small part due to central bank efforts to prop up the global economy.

Although a lot of pundits are suggesting that tonight's FOMC statement will be a non-event, from the online spread betting market's perspective it better have a bullish climax.

Consumer confidence in the US climbed to a five month high in April as the perception about the world's biggest economy has improved.

As if to emphasise that, a separate report also indicated a significant rise of property values in 20 cities.

Although the US is not yet in the position to pull the rest of the developed world out of recession, it is currently viewed as the best of a bad bunch.

As a result, the Dow traded cautiously, as one would expect ahead of FOMC meeting, but did manage to push 31 points higher to 14,841.



Stock Markets: 30 April 2013

European equity markets are set to open higher this morning on expectations that this week's central bank meetings will be littered with dovish comments.

Yesterday's stock market optimism was fuelled by the hope that central banks around the world will come to the rescue of stuttering economies with yet more monetary stimulus.

Some pundits are suggesting the prospect of an ECB rate cut on Thursday as the reason for the European moves higher, but this has been on the cards for some time and has been largely priced in.

The real issue is whether they can do anything else to promote growth in the region.

Mario Draghi has stated that he is looking at 'various tools' to bolster the Eurozone but he has also said that the ECB is reaching its operational limits.

Considering the ideological clash amongst many of its members, Draghi's options are being limited; it doesn't look like there will be much more to follow.

The real hope this week is the Federal Reserve. Looking at the broad weakness in the dollar yesterday, it looks as though markets believe they will provide the stimulus to keep the bulls going.

We had thought that the Fed would start scaling back on quantitative easing some time this year, however, following the run of weak economic data and low inflation, they now have the justification to keep the presses running.

Many are now speculating that the Federal Reserve will at least maintain its commitment to bond buying at its meeting on Wednesday.

In addition, the US housing sector is on the mend, with pending home sales rising 1.5% against estimates for a 1.1% increase. That helped push the Dow Jones 106 points higher to 14,813.



Stock Markets: 29 April 2013

Despite US markets making multiple new highs in April, most European markets put in their high for the year back in mid-march and are still some distance off their all time highs.

With equity markets walking a precariously mildly-bullish tight rope over a chasm of fundamental stagnation, it won't take much of a gust of bearishness to unbalance sentiment. And with the end of April fast approaching the old St. Legers day adage will be on everyone's lips.

Probably the biggest saviour that bulls could get this week is from the FOMC statement on Wednesday.

Recent comments from Fed members indicated that there had been serious consideration given to scaling back quantitative easing. However, following a sustained run of weak economic data, it is hoped that those discussions now appear premature.

On Friday the US Commerce Department released its GDP figures which indicated a lower than expected expansion rate. That confirmed worries that despite the recent optimism, the world's biggest economy is still struggling to move up a gear.

As a consequence the Dow Jones declined slightly, falling 9 points to 14,705 as investors started to prepare themselves for a busy week with plenty of economic reports on both sides of the Atlantic.



Stock Markets: 26 April 2013

European shares are set to ease slightly on the open following some mixed Asian trading and a modest pullback into the US close as caution crept in ahead of today's US GDP figure.

The UK economy narrowly avoided slipping into a triple dip recession yesterday, with first quarter GDP expanding towards the top end of estimates at 0.3%.

Whilst critics of the coalition's austerity measures were notably quiet, George Osborne was bereft of any cocksure 'I told you so' comments and instead warned that turbulent times still lay ahead.

Markets were equally chagrin, with the FTSE 100 closing just 7 points higher at 6426.

GDP from across the Atlantic is set to decide sentiment today, with analysts forecasting a surge to 3%.

However, even if the data comes in on estimate, we're unlikely to see President Obama and Ben Bernanke exchanging high fives.

Much of the pick up is due to previously delayed defence spending and businesses stocking up on inventory which, as the recent negative retail sales data indicated, they may fail to shift later in the year.

Similarly to the UK, serious headwinds are on the economic radar in the US and even if the figure comes out as expected, it won't be any reason to break out the ticker tape parade.

Nevertheless, the Dow Jones did manage to resume its rally yesterday, gaining 48.5 points to 14,713.5, on better than expected jobless claims figures and as earnings continue to top estimates.



Stock Markets: 25 April 2013

In Europe, stock market indices are set to open fairly flat as the bulls pause following this week's solid gains.

In addition, a mixed finish in the US and some choppy trade in Asia has failed to provide any directional cues.

Today will see the release of the UK's Q1 GDP figure and, unfortunately for George Osborne, it's a pretty quiet day for economic news, meaning that he may have more attention than he would like.

Adding to the Chancellor's sleepless night will have been the unwarranted yet timely kickings the UK has received from the IMF, Fitch and notable market participants such as Bill Gross.

However, whilst Ed Balls will be salivating over the prospect of a triple dip recession and the opportunity to make some political capital, markets are likely to be more pragmatic about today's figure barring any extreme readings.

Analysts' estimates range from -0.3% to 0.3% and anywhere in this region would be neither here nor there for the 'bob along the bottom' economy.

Whilst a negative number would naturally provide left wing Keynesians with fodder that the Government's austerity measures are wrong, CFD trading markets are still likely to give them their vote of confidence for now.

Yesterday's US economic data was a bit of a mixed bag, giving a slight advantage to the sellers who pushed the Dow Jones 34 points lower to 14,673.

On the one hand, first quarter earnings continued to exceed expectations but on the other hand macro data was weaker than hoped.

Durable goods orders crashed by 5.7% last month against predictions of just 2.8% drop.



Stock Markets: 24 April 2013

European equities are set to open higher this morning, tracking a strong close in the US and firm gains in Asia as an expectation of further monetary easing continues to fuel the bullish mood.

Indices surged yesterday as weak economic data around the globe convinced traders that policy makers will have to engage in more monetary stimulus to keep their respective economies afloat.

Despite the clear signs of contraction in global manufacturing, the prospect of the quantitative easing horse being flogged once more seems to be enough for traders to shrug off news that would otherwise sink equity valuations.

Although today's start is expected to be firm, the FTSE is set to under perform its peers as some constituents go ex-dividend, knocking 9 points off the index.

The corporate earnings in the US continued to surpass the estimates with Netflix and Travelers leading the rally in equities.

On top of that, new home sales data came in slightly above consensus and that added to investors' optimism.

As a result, the Dow Jones moved 143 points higher to 14,715, with a short spike down in afternoon trading following a bogus tweet about bombs at the White House.



Stock Markets: 23 April 2013

European equities are set to open flat ahead of a busy day for economic data.

The global economy will get a snapshot of the manufacturing sector today with PMI data out from China, Europe and the US.

The HSBC Flash Manufacturing PMI for China has already sparked caution by coming in weaker than expected; yet another sign of a global slowdown.

In Europe, alongside the manufacturing data, we will get Services PMI data which is also expected to show that the region remains mired in contraction.

In the UK, the Public Net Sector Borrowing requirement is set to be released showing that annual UK Government borrowing came in marginally below official forecasts.

While a minuscule victory for George Osborne, the overall debt level remains tentatively high and any negative surprises would probably cause traders to reassess the recent downgrade by Fitch.

In the US, as well as the Manufacturing PMI data, we will also see the latest New Home Sales data.

Yesterday's strong start in Europe was eradicated by the weaker Existing Home Sales data so traders will certainly be cautious for any further signs of trouble in the US housing market.

In a relatively quiet session, the Dow Jones gained 35 points to 14,574 after being driven by rallies in the energy and mining sectors.

The initial slump in indices, sparked by a weak reading for existing home sales, was reversed once investors had a second look at the numbers and decided that housing is on the mend.

In addition, the New York Fed's William Dudley provided comforting words about support should the market need it.



Stock Markets: 22 April 2013

European equity markets are set to open significantly higher on positive cues.

We are currently expecting the FTSE to open 49 points higher at 6336, the CAC to gain 12 points to 3664 and the DAX to rise 27 points to 7487.

US markets closed higher on Friday, buoyed by a host of decent corporate results and optimistic expectations that this week's bellwethers will do the same.

Already, this positive mood has seen Dow futures gaining 70 points overnight.

Asian markets are also trading sharply higher, led by the Japanese Nikkei which is nearing a 5 year high.

Japan's optimism seems to be founded on the fact that they didn't receive any explicit singling out at the G20 for their exceptionally loose monetary policy.

Despite warnings against competitive currency devaluations at the G20, Japan actually received commendation for their actions which has given the green light for the bulls to storm higher.

The UK is also set to show remarkable resilience at today's start, especially following the IMF's recent caution and the credit downgrade from Fitch.

It seems that traders aren't giving much weight to the IMF's u-turn on austerity or to a ratings agency that deems France a better credit risk than the UK.

Amid better-than-expected corporate earnings in the US, market participants decided to close some of their short positions ahead of weekend, pushing the Dow Jones 44 points higher to 14,530.

Meanwhile, G20 finance officials agreed that more needs to be done on a global level to boost economic growth which also kept stock markets well supported.


By Jonathan Sudaria, 3 May 2013


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