Stock Market Update 16 March 2012

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Stock Markets: 16 March 2012

US markets continue their climb with the S+P 500 hitting its highest level in almost four years. Yet European indices and certainly in the case of the FTSE, still don't seem to be following their lead.

The London market is lagging its counterparts, stubbornly refusing to break through resistance and still the 6000 level remains elusive.

Investors have been given a little bit of a reality check as mining stocks struggle to make any significant gains on the back of the warnings surrounding the Chinese economy. These are the real growth story shares, the heavyweights that have been behind much of the rally thus far. Since the FTSE has a large chunk of miners in it, the index spread trading market is heavily reliant upon them.

The market has literally gone sideways this week and some of the thin volume could be contributed to it being Cheltenham week. Today is Gold Cup day at the race festival and so it's unlikely that we'll see volumes pick up and there is not a huge amount to write home about when it comes to economic data releases.

However, there is the release of US consumer prices at lunchtime and then we end the week with Michigan confidence figures. Since the rally is being purely driven by the Dow and S+P 500 the bulls are expecting them to carry on higher.

The German Dax does seem to be making best attempts to follow the US stocks higher as it is now firmly above the 7000 level at 7150 this morning.

For the FTSE we're flat to slightly lower on the open at 5940 and as mentioned if it wasn't for the mining sector just keeping the index in check, we would probably be sailing above 6000.



Stock Markets: 15 March 2012

The FTSE spread trading market is trading flat on the open this morning at around 5945. Once again the London market has failed to push on through to new highs for the year whereas the German and French markets did yesterday.

The 6000 hurdle remains a tough one for UK investors to push the market over and the FTSE is lagging its European counterparts. Yesterday the drag for the FTSE was the mining sector that is still suffering from an overhang from Chinese data that continues to soften.

Economic data is US heavy today with the weekly jobless numbers and at the same time producer prices followed by the Phili Fed manufacturing survey afterwards which is expected to rise slightly.



Stock Markets: 14 March 2012

In the US overnight, the bullish tone struck by the FOMC meeting helped push the Dow Jones index to levels not seen since 2007, over 13000.

This bullishness is translating into gains for European indices this morning with the FTSE rising 20 points to 5975.

Technical analysis suggests that the next target to the upside is 6000 and then 6030/45 and 6100. Conversely, support is currently at 5950, 5915 and then 5870/50.

Quite a bit of data to get our teeth into today with unemployment numbers from the UK this morning where the data is expected to show tentative signs that the UK labour market continues to stabilise.

We remain a long way off from the sort of job creation and falling unemployment that the US is currently enjoying. However, there are indications from other employment surveys that there are jobs in the services and manufacturing sectors which just remain in expansion mode.

The thing that is counter balancing this is the public sector job cuts and so claimant counts are due to rise by some 6000 but the overall rate is expected to stay at 8.4%, still its highest level since 1995.

Other data includes EU industrial production which is expected to rise as overall the manufacturing looks to be stabilising, however it's a very different story for both core Europe and the periphery. Then later at lunch time the US releases its current account balance.



Stock Markets: 13 March 2012

The second Greek bailout will go some way to alleviating the pressure on the country over the near term. However, in order for the targets set by the EU to be hit, and to give Greece a fighting chance of avoiding the need for another bailout, it desperately needs growth.

In fact the whole of the Eurozone needs growth in order for it to avoid a catastrophic bout of contagion that will drag Portugal and then Spain and Italy into the mire.

The markets however march on higher regardless of these threats as the European situation is seemingly being brushed aside for now.

Having said that, our spread trading account holders remain bearish and have been selling into this little rally, expecting the near term resistance around the 5950 area to hold firm. No doubt they are hoping for a similar sharp retracement like the one we saw exactly a week ago.

But when you consider how close we were to apocalypse only a few months ago the situation now is so much better following the ECB's mass injection of cash.

This has stabilised things for Europe and elsewhere things aren't all that bad either. In the US, jobs are being created, as has been proved by the latest two very strong NFP releases, and even though China's economy is cooling somewhat, it continues to grow rapidly, fuelling global growth.

At the time of writing the FTSE is at 5915 up some 20 odd points, but as mentioned it seems to be finding the resistance levels just above here a bridge too far.

Those spread trading on indices have a lot to absorb on the economic data front today, with the UK trade balance due to show a rise in imports. There is then an influential German business survey expected to show the German economy will avoid an official recession following its mild negative growth in the final quarter of 2011.

After that the focus will be on the US as they release retail sales which are expected to rise slightly, but even more so when including car and petrol sales. The figures are expected to show the strongest demand for car sales since 2008.

Then we end the day with the FOMC meeting which is shorter than normal, one day as opposed to two and no press release, so there may not be much in the way to report here. Nevertheless, Ben Bernanke will not want to spook the shares markets and will almost certainly keep the door open for more stimulus.



Stock Markets: 12 March 2012

We commence the week just in the red as investors continue to tread cautiously following the finalisation of the Greek debt swap over the weekend and the impending expected official go ahead for the second bailout today.

Ever since the sharp declines of early last week, financial spread trading investors have been calling into question the sustainability of the rally so far this year.

Since we're yet to take out the highs of the year following the recovery from last week's lows, the stuffing seems to have been temporarily knocked out of the bulls.

The main reason for the soft start today is once again China. This time a week ago their downgrade to GDP forecasts was the catalyst for the sell off, along with worse than expected growth figures from other emerging economies such as Brazil.

Today Chinese export growth has disappointed and so the risk on rally is being kept in check. China's part to play in the global recovery is crucial and with data like this it fuels concerns about the possibility of a harder landing for their economy than was previously expected.

If Europe and the West are not buying Chinese goods at anywhere near the rate that they have been in the past few years, then China's economy could be in for more headwinds which is one of the biggest threats to global growth right now.

This morning the FTSE 100 is trading at 5860, down some 25 points and it's not just the London index that is lower.

Other European indices are trading in the red and there's a real risk off feel about this morning's price action. The dollar is higher and the likes of commodities and mining stocks are lower.

If we don't see the FTSE 100 back above 5900 and testing the year's highs then the recovery since the losses early last week might have been little more than a dead cat's bounce.

Only last Friday was the US employment data widely welcomed by traders who pushed indices higher, especially since the bumper numbers from the week before were also revised upwards, however that all seems quite a distant memory now.



Stock Markets: 09 March 2012

Is this the final breaking point in the conversation over Greece? Unfortunately I fear not as we've been here so many times before.

It would be nice not to have to talk about the peripheral Eurozone nation and that maybe the case for the next few months after the PSI agreement deadline was finally met last night.

But if you think that there'll be no more talk about the Eurozone and the effect that it's recession and ongoing sovereign debt crisis then I'm afraid that you are mistaken.

The finer details of Greece's bond swap are being thrashed out with claims that a decent amount of the private creditors are taking part. Greek officials are saying that the target of 95% participation has been met, allowing them to claim that the agreement is completely voluntary.

Either way this is slightly academic as the deal has been done and Greece can now write down vast swathes of the debt it owes to private investors and move on.

The focus of the spread trading markets is likely to shift onto other parts of the Eurozone with Portugal being the main target.

Things here are looking decidedly dodgy too and many believe that they'll need another bailout from the EU, despite the efforts the country has been making in order to deal with its debt problems.

So far this morning the yields on the ten year bonds for Spain and Italy remain placid so there's no real fear at the moment.

The market is very much taking the news in its stride. Initially following the announcement the FTSE looked to be heading higher by some 20 points but at the time of writing we are roughly flat on the day in the mid 5800s.

The bounce from Tuesday's lows has been impressive but yesterday and this morning it just seems to have come to a bit of a standstill.

Very near term resistance is seen at 5890, 5910 and 5930 meanwhile support is around 5790 and 5765.

Over the longer term the index's upward trend has been called into question somewhat but the support at the 55 day moving average in the mid 5700 region has held up for now.

A break below here might get the alarm bells ringing for the bulls and this 5765/55 area is quite a key support level.



Stock Markets: 08 March 2012

The CFD markets have picked up following the falls from earlier in the week assisted by the prospect of the required PSI on Greek debt for the country to avoid default.

By the deadline tonight we will have a better idea of just how much of the €206 billion of private sector loans will be swapped for longer dated and lower yielding bonds.

This should finally get Greece out of the firing line and as more PSI has become apparent the markets have become perkier.

Equities have also rebounded well in particular across the pond where they recouped some of Wednesday's losses. They were assisted by comments from the Chairman of the Federal Reserve Ben Bernanke who said there is a chance of further quantitative easing if required.

Despite downbeat comments on the prospects for stimulus earlier in the week, which where partially to blame for the large sell off, the world's largest central bank has moved to try and calm investors fears of being left on their own.

The other boost for markets yesterday was the decent ADP employment figures which will give the bulls hope for a good number tomorrow at the Non Farms Payrolls.

So this morning the FTSE is in recovery mode on the indices spread trading markets, following on from yesterday's little bounce. Once again a retracement has proved short lived and presented the bulls with a buying opportunity.

But the index is still yet to get beyond the major psychological level of 6000 which at this point in time now seems quite a way off. At the time of writing we're some 30 points in the black at 5820.

As mentioned in yesterday's comment, big sell offs can often come in twos, but that doesn't seem to be the case this time. However, this doesn't mean that investors' concerns are completely over.

This week has highlighted that the current engines of global growth are starting to just stall a little following the falls in GDP for Brazil and Australia and the downgrade by China to their GDP forecasts.

The rallies across European indices are quite mixed this morning with the likes of the DAX and CAC doing slightly better than their counterparts.



Stock Markets: 07 March 2012

As has been proved time and time again, markets can be subject to big moves to the downside especially when all the sellers pile in and send stock markets tumbling.

Often these falls can come in twos and we had been calling the FTSE to commence the session some 30 points lower overnight as Asian markets joined the selling.

However, gradually throughout the morning our quote has recovered somewhat and at the time of writing the FTSE 100 spread trading market is only just in the red at 5760.

The sell off yesterday showed just how jumpy investors can be and whilst we haven't seen anything like it at all so far this year, it brings back memories of the volatility experienced back in August and November last year.

Even though a big fall is often proceeded by another one, we have seen all the retracements in 2012 met by buying. Considering that the uptrend seems to still be intact, this could be seen as yet another buying opportunity by those bulls.

It's when the financial spread trading markets are at the height of their panic mode that they have often reached their furthest point and overnight and this morning we've seen some tentative buyers of the FTSE creeping in.

However, the current little bout of panic mode may not be over yet as we approach tomorrow evening's deadline for the PSI to agree to take write downs on their Greek debt.

This amongst other issues has been the trigger for the weakness in equity markets so far this week.



Stock Markets: 05 March 2012

Picking up from where we left off last week, the decline in global equities is ongoing this morning as China announced its lowest economic growth target since 2004.

They cut their growth target from 8% to 7.5% which has concerned financial spread trading investors worldwide.

In shores closer to home, Spain has stated that they could slip back into recession today just in time to show that European retail sales have declined for a third consecutive month.

Lets not forget about the elephant in the room that is Greece, they're still in the headlines too, as we await this week to see how their fate will be decided by a small group of their private creditors.

They will have to decide whether or not to accept a 75% haircut on their bonds in return for a mixture of new long-term Greek bonds.

If more than a third of them reject the deal then their whole bailout will collapse, which would be a real concern for the wider Eurozone picture.

In other news, Vladimir Putin claimed victory in the Russian presidential elections last night despite rumours of vote fixing. The news is that some investors see his re-election as potentially quite positive as it could ignite their economy with large investment projects and privatisations.

The weight on Friday's session came mainly from weakness in the mining sector, dragging the UK blue chip index down to 5911.1.

The situation on the other side of the Atlantic wasn't much more exciting with the Wall Street ending the day flat and the broader S+P spread trading market losing 0.3% as investors banked their recent gains and looked for the next guide.


By Simon Denham, 16 March 2012


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