Stock Market Update 11 January 2013

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Financial Spreads: Spread Betting and CFD Trading

Stock Markets: 11 January 2013

So the FTSE has commenced the session in positive territory and there's little in the way of major economic data releases that might lead to an increase in volatility.

Industrial and manufacturing production from the UK will be interesting to watch and then we will see the US trade balance at lunchtime.

Also see today's feature Is the Investment Community is Getting Overly Bullish?

Stock Markets: 10 January 2013

Across the pond in the US, the Dow enjoyed a lift from the Alcoa results, which got the fourth quarter corporate earnings season off to a good start.

Buyers pushed the Dow 60 points higher to 13,390, with the rally continuing overnight once China announced a better-than-expected trade balance for last month.

This came in at +$31.6bn, versus expectations of +$19.7bn, and has also helped to keep the European bulls in charge this morning.

As a result, the FTSE is currently in the black and trading bang on the 6100 level at the time of writing.

Our spread trading account holders remain sellers of the UK index and are also very bearish of US stocks. This stance is very much against the current trend and so many will be pinning their hopes on a correction at some point soon.

Also see today's feature Time to Sell UK Retail Shares?

Stock Markets: 09 January 2013

The coalition government managed to impose one of their 'cuts' last night by capping the increase on all welfare benefits to just 1%.

This has got the New Year off to its usual start for politicians who continue to score political points by taking opportune and vote winning stances.

Whilst none on welfare will actually see a freeze or a fall in their benefits in cash terms, the effect of inflation will mean a real terms cut and a saving for the government.

So a 'cut' of sorts, although hardly the sort of cut that is required to really address the bloated welfare state that now makes up a third of government spending.

Opponents of the move are trying to pander to voters, claiming that the ramifications are unknown and likely to affect low income earners. In taking such a stance, they are simply trying to pull the wool over the eyes of the public.

The UK simply cannot afford such a welfare state in its current form and so something has to give.

UK gilt yields fell back in the run up to last night's vote, but this morning those yields have risen a little.

This indicates that whilst the markets might be happy to see that more measures are being taken, this 'cut' doesn't go far enough and more has to be done.

If we are to keep our triple A credit rating not only do further cuts, or 'cuts', have to be made, but growth measures are now becoming all the more important.

Last night's profit taking in the US saw the Dow shed 55 points to 13,330 but the earnings season across the pond got underway after the close.

Alcoa's results were well received, helping to boost Asian markets overnight, and this strength has filtered through to European indices this morning.

The FTSE 100 is currently up by some 20 points at 6074, higher than our original calls.

As the bulls get a little wind behind them they'll be looking to see if the FTSE can test the recent highs around 6100 and beyond.

There's little in the way of any economic data out today so a degree of focus will be on the US earnings season which is now underway.

Financial Spreads' clients remain sceptical of the recent strength, being largely short of the FTSE, and in all honesty the strong start to 2013 has taken most people by surprise.

There are plenty of bullish calls but many of those bulls are probably thinking that a move to the downside has to occur before we can climb higher. This is presumably what our clients are hoping for at least.

Stock Markets: 08 January 2013

Even though 2013 is only in its infancy, today's close of play for US markets is considered by some to be an important landmark.

In fact, historically speaking, it often correlates with how the rest of the year plays out for equity markets.

Since 1950, around 85% of the years when the S&P 500 has been positive after the first five trading days have gone on to close in positive territory.

As we speak the S&P 500 is up 2.2%, the Dow 1.8% and the FTSE 100 2.5%. Therefore, if you believe that history will repeat itself, you could be pretty confident of an equity market rally in 2013.

Ever since the temporary deal on the fiscal cliff, stock market indices have been in a very bullish mood and, for many of those bulls, with good reason too.

Recently, there's been some decent economic data, particularly from the US and China, and Asian markets have also gotten off to a good start for the year.

In addition, so far in the first few days of 2013, there's been a breakdown between risk asset correlations such as equities and the euro.

This suggests that stocks and shares are looking attractive to investors in their own right, which is another reason for the bulls to be chirpy.

Nevertheless, this hasn't stopped a little bit of profit-taking from creeping in. The Dow seems to have gone into a small a consolidation phase after last week's gains, with investors taking some profits off table ahead of the corporate earnings season.

Yesterday, the Dow saw a 50 point drop to 13,384, but the index did manage to remain above its short-term moving averages.

This means that, despite our clients remaining short of the major indices, there's little to suggest that the immediate uptrend is about to come to an end.

Whilst the FTSE 100 did start the session some 10 to 15 points lower, the buyers have already crept back in and pushed us back into the black at the 6070 level.

Near-term support and resistance is seen at 6050, 6000 and 6105, 6160 respectively, so the bounce off that 6050 level is quite significant over the near-term.

Stock Markets: 07 January 2013

As we commence the first full working week of 2013, it will be interesting to see if the strength we've seen so far can be maintained as investors and traders return to their desks in earnest.

Equities got off to a stellar start following the US fiscal deal last week and the days ahead will be a test to see whether the return of some volume will keep indices at these elevated levels.

Whilst many investors seem willing to increase their exposure to equities, with the FTSE already more than 3% higher in 2013, there are still plenty of concerns over just how this year will pan out.

The UK itself has been a hot topic of conversation in recent weeks, especially following all the growth downgrades at the end of 2012.

Equities may have impressed thus far this year, but UK gilts have been heading in the opposite direction and this has led to a spike in the government's borrowing costs.

The likelihood of a downgrade to the UK's credit rating this year has been heightened by the growth downgrades and the fact that Gorgeous George is going to have to borrow more.

That increase in borrowing is also going to cost him more now that the yields have risen over the past week and he has already announced an extension to his austerity program.

Without a decent spurt of growth, it's going to be even harder to meet his fiscal targets in the years ahead.

Even the forecasts for the UK economy in 2013 are now looking rather ambitious following the dip in services activity below the 50 level in last week's PMI survey.

Nevertheless, we are seeing a little bit of good news for banks this morning as a relaxation of the Basel banking rules has been agreed.

This will loosen the noose somewhat and so banking stocks are filling the leader board on the open today.

Overall, however, the FTSE 100 is just in negative territory at 6080 as the week kicks off with some mild profit taking.

There's little in the way of economic data out today, but things warm up as the week goes on with retail sales data and interest rate decisions from the BoE and ECB.

The focus will be very much on retailers this week as we get Christmas trading updates from all the big supermarkets.

Morrisons opened the batting this morning by announcing a drop in sales over the festive period, although this hasn't caused any selling pressure on their stock so far today.

Last Friday was the first US Non-Farm Payroll day of the year, which was a bit of a non event in the end as the report showed an increase of 155,000 jobs, largely in line with expectations.

This failed to impress CFD investors, although it did add to speculation that the Fed might not stop the stimulus as soon as had been suggested the previous day.

As a result, the Dow pushed a little higher, with the index adding 40 points to 13,435.

Stock Markets: 04 January 2013

This January has commenced very strongly and, in the past, positive Januarys have often meant a stronger year for equities. This was also true in 2012 which saw its fair share of ups and downs.

It's still very early days for 2013, but right now there is a great deal of bullish sentiment out there for indices.

Looking back at previous bull markets, it seems that many have tended to last between 4 to 6 years.

This March will be the fourth anniversary of the current bull market, which has seen the FTSE rally over 70% since 2009. So the big question is, has this bull market got further to go?

First things first, let's get January out the way. If it's a positive month then by historical measures that bodes well for the rest of the year.

This morning, the session of indecision in the US has encouraged a little bit of profit taking in the FTSE, with the index trading 10 points lower on the open.

There's plenty of economic data today, including the first US Non-Farm Payrolls of the year, which is expected to come in at 150k with the unemployment rate due to remain at 7.7%.

There could be some pressure to the downside, however, with general concerns over the fiscal cliff taking its toll on hiring in the run up to the end of 2012.

Before the Non-Farms figures we have the UK services PMI data which will be closely watched as it's such a key component of the economy's overall GDP.

Last month saw a poor figure, far worse-than-expected, and so many will be hoping to see a similar surprise to the upside as we saw with the manufacturing PMI earlier this week.

Also see today's quick analysis on: Hawkish FOMC Minutes Hint at an End to Quantitative Easing.

Stock Markets: 03 January 2013

The FTSE didn't stumble yesterday as it finally found the momentum to break through the psychological 6000 level which had held it back throughout 2012.

We haven't seen a 6 in front of the FTSE 100 since May 2011 and, whilst there's no guarantee that it will remain there, the momentum looks to be with the bulls for now.

Our spread trading account holders have naturally opposed the breakout by selling into the strength and new resistance levels have been pegged in at 6045 and 6105.

If they are tested, support areas could come in at the previous resistance of around 5985/65 and 5900.

It's not just the recent deal on the US fiscal cliff that has got investors excited, but the recent economic data has also looked encouraging.

Not that our manufacturing sector is the engine behind global growth, but yesterday's manufacturing PMI survey was encouraging as it jumped back above the 50.0 level into expansion territory, which was higher than expectations.

Today's construction PMI survey may also post a better-than-expected figure and it too could claw itself back into expansion.

It's not just the UK either as Chinese manufacturing and non-manufacturing data has commenced the year in good form.

Nevertheless, we can't rise in a straight line forever and the FTSE is seeing a little bit of profit taking this morning, with the index drifting lower to 6020.

There are still many headwinds for the financial markets to face in the year ahead, not least the US's fiscal woes which are by no means over.

The can may have been kicked down the road for now but in a couple of months more negotiations on the debt ceiling and spending cuts will be required.

On top of this, many banks remain in a perilous position and are stuffed full of toxic assets, which is why they continue to be so reluctant to lend.

Another banking crisis would mean that all expectations are out and not even a deal on US debt would be enough to save the global economy or equity markets if that situation arose.

There's plenty of economic data today with not only the UK construction PMI survey but also mortgage approvals and consumer credit figures this morning.

Later on, we will also see the ADP private payrolls from the US and then the FOMC minutes tonight.

Stock Markets: 02 January 2013

The New Year will get off to a busy start as the usual beginning of month economic data is released.

For UK spread trading investors, the PMI manufacturing survey is expected to remain at 49.1, however there could be some downward pressure from new orders.

Later on this afternoon, the US ISM manufacturing data is expected to creep back above the 50 mark into expansion territory.

Of course, at the end of the week, we will also see the first Non-Farm Payroll of 2013.

Also see today's quick analysis on: Spread Trading Buying Frenzy as US Avoids the Fiscal Cliff.

By Simon Denham, 11 January 2013

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