Stock Market Update 7 December 2012

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Financial Spreads: Spread Betting and CFD Trading


Stock Markets: 07 December 2012

There's something about the 5900 level that the FTSE really doesn't like. Once again we are seeing profit takers creep in around these levels.

Financial Spreads clients have managed to pick the top again although it's hardly a mass sell-off that's got investors running for cover.

In fact, the European indices have been leading the way so far this month in terms of any Christmas rally, should it arise. The DAX in particular, has been knocking on the door of a new five year high.

The FTSE 100's rise since the summer has really lagged its European counterparts. It is understandable that so many UK fund managers are getting frustrated with the returns they are making. Although, in a normal year, the returns would look respectable.

Anything north of 10% is an achievement and the FTSE 100 compares well to the FTSE All Share index which is up some 8% in 2012. However, the DAX 30 has put on 25% since hitting the summer lows, compared to the FTSE 100's 13%.

Across the pond, the US stock market indices have not even rallied in double digit percentage terms since those summer lows. There may be a possible message in these statistics.

Ever since Mario Draghi said in June that he would do 'whatever it takes' to save the euro, sentiment towards the currency has turned 180°.

Draghi's statement sent the single currency higher, European equities higher and peripheral bond yields lower. I investors have become more comfortable with the idea that both the political will and the central bank will, to save the euro, is stronger than the economic reality.

Across the pond however, the focus is not only on the fiscal cliff. The longer-term implications of the US debt overhang is going to have to be addressed more meaningfully after they kick their can down the road again, which is the most likely outcome from this current sticking point.

Whilst on the subject of the Dow, the US index crept higher last night, adding 40 points and taking it to 13,074, its highest level for a month. It was the tech sector that led the way with Intel being the largest mover and adding 1.6%.

This was accompanied by some encouraging data as the jobless claims fell by 25k to 370k. This lead to us to call the FTSE 100 to open higher at around 5915. That was mildly ambitious and so we're bang on the figure of 5900 at the time of writing.



Stock Markets: 06 December 2012

The global financial markets continue to focus on the bigger macro picture, rather than our domestic issues, and it's the US fiscal cliff that dominates.

Further stalemate between the Republicans and the Democrats is making life difficult for US stocks and so this morning's European trade is merely flat to slightly positive.

The FTSE is currently trading at 5895 and continues to look like it wants to have a crack at the 5900 level, which remains the near-term resistance.

It seems that any attempt at a Christmas rally will struggle as long as the index remains below this level and the negotiations across the pond remain stuck in a quagmire.

Today sees lots to watch on the economic calendar, with GDP data from the Eurozone and central bank interest rate decisions from the BoE and ECB.

All eyes will be on what the central banks say rather than what they do, as they are not expected to change anything.

Investors will want to hear their views on the current growth situation and whether they will do anything to address it.

Also see today's updated feature - The Chancellors Autumn Statement and the Financial Markets.



Stock Markets: 05 December 2012

In UK shares spread trading, today's biggest riser is Tesco, which warrants a mention as the supermarket has announced a strategic review of its US operations, with all options on the table.

Investors have taken this as a signal that they could mothball the whole operation, which has been nothing but a thorn in their side as they have tried and failed to crack the US market.

There's lots of data on today's economic calendar, with the UK's PMI services expected to rise from 50.6 to 51.1; encouragingly still in expansion territory.

We'll also see services PMI and retail sales from the EU, and then the US will release its ADP private payroll figure and ISM non-manufacturing.

Also see today's feature - The Chancellors Autumn Statement and the Financial Markets.



Stock Markets: 04 December 2012

Markets pulled back a little yesterday as the fiscal cliff negotiations looked to have reached a deadlock once again.

The Republicans don't seem to understand that public opinion is hugely in favour of asking the wealthy to pay a little more in tax.

This is also what the President wants to do, yet the Republicans' most recent proposals don't even touch on the subject.

Surely they understand that if they don't agree to some sort of tax increase on the wealthy then Obama will just throw it out of the window.

No one wants to see higher taxes, but US taxes are generally far lower across the board than in most other countries. This is particularly true for higher income earners when you compare them to the likes of the UK and much of Europe.

The Republicans' stubbornness is a major sticking point, but then Obama isn't without fault in his objection to making swingeing spending cuts.

Whichever way you look at it, the US debt pile is vast and unsustainable. These fiscal cliff talks are nothing compared with what will have to be addressed later down the line, and the framework for a larger deficit reduction program will be debated next year.

In UK spread trading, the FTSE had opened lower but, despite the uncertainty surrounding the fiscal cliff, the index has already reversed its losses and is just back in positive territory at 5873.

We did see some support around 5850, and the bulls will now be hoping to test the resistance at 5900, although this has been a tricky area in the past.

If we do manage to break above here, the bulls will probably push for a Christmas rally. Having said that, given all that's going on at the macro level, it's unlikely that any such rally would be smooth.

There's little in the way of economic data out today apart from the UK's PMI construction survey. This is still expected to indicate expansion, although a decline from 50.9 to 50.5 is predicted.



Stock Markets: 03 December 2012

The financial spread trading markets seem to be in a pretty festive mood, even if the Chancellor of the Exchequer isn't.

He will be busy preparing for Wednesday's Autumn statement, which is likely to include more austerity and some sort of gaff.

History will tell you that Gorgeous George is rather good at putting his foot in it, with either a pasty tax or something else to inspire negative headlines.

The bottom line is that, in order for him to meet his deficit targets, he has to impose further tax hikes and spending cuts as there simply isn't enough growth to help.

He made it clear at the weekend that welfare is an area where he really wants to make some savings and no doubt the rich will pay through their pension allowances.

Unfortunately, more austerity has been proved not to work in the periphery of the continent, where the likes of Greece are paying a very heavy price for the measures that have been imposed upon them.

Even Germany plans to further tighten their belts in 2013, as they aim to lead by example. Unfortunately, to impose such fiscal tightening upon Europe's biggest economy will only serve to push them closer to recession as well.

Next year's European growth outlook doesn't look pretty and, if more austerity is imposed upon the UK, growth will be even harder to come by.

It's no wonder that there are so many calls for the Chancellor to adjust his targets; even extending the deadline to balance the books would give a little more breathing space.

All will be revealed on Wednesday, but for now these calls seem to be falling on deaf ears.

As mentioned, the markets seem to be getting into the festive spirit, as you would expect now that we are in December.

The FTSE 100 has risen in 23 of the last 28 Decembers, with an average gain of over 3%, and only fallen 5 times, with an average fall of just under 2%.

So, if you are a believer in history repeating itself, it would be reasonable to think that we'll see the usual rally despite the obvious headwinds.

Generally, as we saw in 2011, the headwinds don't seem to deter investors from buying indices in the run up to Christmas, with 5 exceptions to this rule.

Nevertheless, our clients remain less optimistic as they continue to sell the FTSE 100 around these highs. They may be waiting for a bit of a pull back before hopping onto any Christmas rally.

The FTSE 100 is at 5880 at the time of writing, up 15 points, although it has already been higher this morning.



Stock Markets: 30 November 2012

This morning, the FTSE 100 is a handful of points in the red and, for once, consumer confidence numbers from the UK have surprised to the upside.

The figures have reached an 18 month high, moving from -30 to -22, with clear signs that people are a little more optimistic about the future and their personal finances.

The jump in Q3 GDP, which was primarily driven by consumption, looks like it has had a positive effect on UK consumers. In fact, many of them are probably still a little punch drunk from the summer's Olympics and this is a good thing for retailers in the run up to the Christmas season.

Also on the economic data front, there's EU unemployment, which has risen in each of the last few months, and then US personal income and spending data.

Finally, we will see Chicago PMI data, which shouldn't have been disrupted by Sandy and so should provide a better gauge of the wider state of US manufacturing. Having said that, the figure is still expected to be below its 64.0 February high.

Also see today's updated feature 'The US Fiscal Cliff'.



Stock Markets: 29 November 2012

On the European open, the FTSE is higher by some 25 points at 5830, a little lower than our overnight calls.

The index is currently knocking on the door of the near-term resistance at 5835 and, if we can move higher, the next resistance levels are at 5850 and 5905.

To the downside, support is seen at 5755 and 5710. Our spread trading account holders clearly expect these levels to be tested before the upside resistance as we have seen more sellers creep in this morning.

Having said that, the Eurozone is providing some support as Spanish and Italian bond yields have been trending lower recently, with the yield on 10 year Spanish bonds hitting their lowest level since March.

This week has also seen a good auction from Spain and today will see an Italian debt sale.

Also see today's feature The US Could Be Hit Hard When Deleveraging its Debt Mountain.



Stock Markets: 28 November 2012

We may have had a scary sell-off just after the US elections, but that shakeout seems to have come to an end for now, with many people saying that the end of year rally is underway.

Nevertheless, in the last couple of years, the usual Christmas rally has been very hard to come by and this year will be no different, with all eyes on the US for the weeks to come.

The weakness in last night's US trade is filtering through into this morning's session, leading many European indices lower.

The FTSE 100 has opened at 5780, falling by around 20 points, with near-term support and resistance at 5775/40/10 and 5835/50/5900 respectively.

For now, the little upward trend seems to have run out of steam around the 5800 level, with much of this week's trading being fairly flat.

Things are relatively quiet on the economic data front today, with US new home sales at lunchtime and then the Fed's Beige Book later on this evening.

Also see today's update on the US Fiscal Cliff.



Stock Markets: 27 November 2012

Following last night's announcement of the Greek debt deal, and a bounce by US markets from their lows, the FTSE 100 is recouping yesterday's losses by moving back above the 5800 level.

Our spread trading account holders have been creeping in to sell at these highs as resistance sits just above us at 5830/50, with the highs of the year still looking a long way off.

This morning will focus on the UK's second reading of GDP. This should give a more accurate reading of the state of the economy in the third quarter than the first reading, which showed the UK grew by as much as 1.0%.

Following some disappointing industrial production data of late, many UK spread trading investors think that the initial figure will be revised lower. However, it is still likely to show a better bounce in growth than had been expected before the initial release.

Also read 'A New Greek Deal but Bonds Remain at a Precarious Level'.



Stock Markets: 26 November 2012

After a strong week of gains for global stock markets, this week's test will be to see whether the bulls can sustain the momentum.

The economic focus throughout the week will be on consumer confidence figures and second readings of GDP, as well as the latest decision on Greece.

This decision is expected to be made today, however, negotiations are being drawn out by the opposing views of how to put the country back on the right track.

Despite the fact that investors generally expect to see a favourable conclusion to the talks, there's a risk that nothing will be agreed.

Even though these funds were intended to be delivered in May, any failure to reach a consensus will mean that Greece needs another emergency loan to prevent it from defaulting.

People are also looking ahead to next week's UK Autumn Statement from the Chancellor. Once again, there are big expectations that something special will be announced, however, realistically, it's likely to be as gloomy as the current weather forecast.

Borrowing has increased and growth has declined, making Gorgeous George's position a difficult one.

In order to meet his fiscal targets he will have to raise taxes and further reduce spending. This is hardly a vote winning combination and he will be very reluctant to impose it on an electorate that is getting tired of austerity measures.

The next general election may more than 2 years away but every political party will be thinking about it.

US indices made solid gains on Black Friday, rising for the fifth straight session, as US consumers splashed out online, hitting a record of $1 billion in online sales.

Before the US open, there were some positive economic numbers from China and Germany, where business confidence rose unexpectedly.

The Dow, which had a half day, managed to get itself back above the 13,000 level, closing 170 points higher.

US stocks also strengthened on the back of increasing optimism that a solution can be reached regarding Greece's debt pile.

Nevertheless, it looks like US investors are waking up with a hangover this morning as we are currently calling the Dow to open 50 points lower.


By Simon Denham, 7 December 2012


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