Stock Markets: 17 August 2012
There are a couple of semi-important economic releases from the US this afternoon, with Leading Indicators and the University of Michigan confidence survey.
It is difficult to know whether these will tell us anything new, but traders should be wary of a sudden price shift at 15:00 (London time).
After mentioning Facebook
earlier, I feel that I should comment on yesterday's odd market activity.
The shares opened 5% lower because the first Lock In period had expired, meaning that there were more potential sellers of the stock.
The odd thing about this was that it was hardly a surprise. It has been almost headline news in the financial press
Investors in the stock must hope that this is as low as it gets. However, with much larger Lock In volumes due to expire over the next few months, I can imagine that holders are not exactly comfortable.
The stock market indices
continue to probe the highs, with the S&P 500
and the Dow Jones within touching distance of the April/May peaks.
Our financial spread trading clients continue to believe in the trading ranges, and they are currently selling all the major indices pretty heavily.
I have just walked back from our dealing desk and I cannot remember ever having such a big client short on our books.
To be fair, until a break out actually happens, many investors will believe that it's reasonable to assume that history will repeat itself. However, I am always mindful of the saying that ''the markets will generally move in the direction that causes the greatest amount of pain to the greatest number of people''.
Resistance in the FTSE remains above current levels at around 5875/85 and 5910/20, whilst support is at 5815/25 and 5785/95.
In the US, the S&P 500 has broken the heavy resistance at 1406/08 and is now considering the resistance at 1416/17 and 1426/28. In addition, the previous resistance, 1406, has now turned into support.
In contrast, the Dow Jones still has a bit more room to the upside, with targets of 13,310/20 and then 13,335/45.
Also see today's report - Italian Deficit Chart is Terrifying
Stock Markets: 16 August 2012
Oh for some volatility to return to the online spread trading markets.
Chinese premier Wen Jiabao tried to get them going yesterday, by issuing a warning that the country's economy is under pressure.
Slowing global demand for their exports and disappointing growth in domestic consumption is starting to weigh.
Against that, Standard Chartered gave some encouraging news as it continued on the recovery trail. The share price moved back above £14 as the bank had some success in negotiating its way through the settlement process with the regulators.
The spread trading
markets simply shrugged their shoulders and looked for more.
continues to sit atop its recent tight range, trading above 5800 for the 8th consecutive business day. However the index is still shy of the highs of the year, when we hit 6000 back in March.
The Dow Jones is struggling to gain ground above the 13,200 level, rising just 7 points in yesterday's session. The market closed at 13,164 as investors sat back and wondered what the Fed's next move could be.
We have seen a very mixed bag of results lately. Some strong economic data has been pared with equally weak news, meaning that investors don't want to commit their strength to a bull rally.
Looking to the future however, with trading volumes continuing to be light, it won't take much to see a hefty shift in either direction.
Stock Markets: 15 August 2012
So, Standard Chartered have agreed a 'payment' to regulators of $340m in settlement of the US's ever widening legal umbrella.
Yet again a company operating within the law in its own country, the UK - hardly a rogue state, has fallen foul of a politically motivated attack on a foreign competitor. Although it should be noted that Standard Chartered did admit that $14m of transactions, which were routed through the US, were illegal.
The payment will come at a cost of reduced asset value for pension and investment funds in the UK. Unfortunately, the fact that this reduction will be significantly more than the payment itself will probably be lost in the headlines.
The regulator and ombudsmen decisions of the last four to five years have been applauded loudly by newspapers and politicians across the globe, but nobody seems to discuss the consequences.
The ombudsman's PPI rulings in the UK will cost banks some £4-5 billion. But the hit on the share price and balance sheets is far, far greater.
Giving a billion or so to a bunch of people who 'claim' to have been miss-sold a product sounds great. That is until you realise that it has cost many multiples of this to our pension funds and reduced the capital of banks, just when we need them to lend.
Banker bashing is self defeating and the sooner that regulators, politicians and ombudsmen realise this, the better.
Benjamin Lawsky, the New York prosecutor, is probably glowing with his success, having pulled $340m from a bank. However, he has also made the US an even less attractive place to do business.
This will probably hasten the day when dollar clearing is performed outside of the USA's jurisdiction. After all, if you claim to have a global currency, you can hardly complain if it has global clearing.
As mentioned, Standard Chartered have agreed a settlement with one of their accusers and so their share price is seeing a bounce. Nevertheless, traders will be aware that, in the US, it is never a case of just one agreement covers all.
There are layers of different lawmakers, all of whom will now want their slice of the cake. So we would be wise keep the bubbly under wraps for a while longer.
The financial spread trading
markets made no interesting moves whatsoever yesterday.
After looking at the various resistance levels several times throughout the session, traders proceeded to reject them.
After the US sales data, the S&P made a spirited attempt at a break out, reaching as high as 1412. However, this was almost immediately stomped on by a wave of selling, as investors decided that discretion was the better part of valour.
One of the problems with technical levels is that repeated failures can start to become self fulfilling. If investors begin to think that a high, or low for that matter, has been reached, then their enthusiasm to hold assets begins to wane, driving prices in the opposite direction.
We are obviously not at this point right now, but clients should be aware that repeated rejections of a level can result in a swift reversal.
The FTSE remains comfortably in the mid 5800's, with support at 5815/20 and 5785/90, and resistance at the recent highs near 5875/80.
Volumes are incredibly light at the moment, and well down on last year's liquidity numbers, which were also very weak historically.
Whilst this does not have a direct effect on valuations, it does mean that any move can swiftly generate momentum out of all proportion to the number of shares being traded.
Stock Markets: 14 August 2012
As many had feared, yesterday saw a quiet session, with markets having a look at the top end of their ranges before drifting off into the afternoon.
This morning's UK corporate results are pretty much a mishmash of the good, the bad and the ugly. However, importantly for the indices, the big players seem to be getting most of the 'good', with the smaller caps getting the 'bad'.
Unfortunately, this is a natural consequence of the poor economic environment. Larger companies are able to rely on their core revenue streams and also have a more substantial ability to cut costs in the face of slower growth.
Smaller corporate entities will naturally do better in strong economic periods, as new business has a greater percentage impact on revenues, but the opposite is true when times are tough.
' clients remain massively positive on single stocks, whilst at the same time they are shorting the major indices.
Those that are short are not aggressively so, but enough to negate the long equity position.
People do find it difficult to be short of a single equity, except in extreme situations. The natural bear stance is just to not-have-a-position. However, with many of the big indices right on their major resistance levels, it is equally natural to be tempted into a short.
So far this year, the FTSE 100 has pushed at the highs a number of times and it has paid off to sell at anything above 5800/5900. Nevertheless, traders should always ensure that they have an exit strategy in place as well.
This morning sees us pushing to the upside once again, with the S&P 500 now above the 1406 resistance level. This might see a bit of interest as dealers worry about a potential squeeze on short positions.
With volumes remaining light, it cannot be over emphasized that if momentum manages to build in a direction then the price could move much further than expected.
With companies sitting on large cash piles, dividends seemingly well covered and interest rates likely to remain ultra low for some time, the prospect of a shift in equity values may be relatively high.
Standard Life's numbers, released just prior to the open, were better-than-expected and we can expect, with cost cutting the buzzword of the day, that margins may well improve going into 2013.
Margin improvement is being mentioned across the board these days which, whilst being bad for job hunters, might add to the attraction of stocks and shares
German and French GDP figures have also managed to slightly beat expectations, although this may be owed to the recent falls in the euro. As a result, we are starting the day on the front foot, with traders pulling on their buying boots.
The FTSE has quite a bit of volume and price resistance just above the current level. Nevertheless, bulls will be looking for a move towards 5920/25 and then the highs of the year up at 6000.
Bears will be eying the heavy resistance and hoping for another failure at these levels, with the first target being a drop to the support at 5785/95. If we manage to break lower then we could see a return into the doldrums of the 5450 to 5750 range.
Stock Markets: 13 August 2012
Today's markets are about as exciting as the Olympic coverage was restrained. The FTSE is stuck in the mid-5800's and, truth be told, the index does not look to have any appetite above 5860 or below 5790.
Since getting above 5800 a week ago, the effective trading range has been around 60 points. This gives some indication as to why the VIX (Volatility) Index has fallen to 14%, from over 20% just a few months ago. Given the quiet open, it's possible that this will weaken again today.
The US markets are almost back to the highs of June, which were also their highest levels since mid-2008. As a result, bullish dealers will not be too concerned about an immediate pull-back as the buying presence seems solid for now.
Major resistance in the S&P 500
is pretty easy to spot at around 1406. If we do manage to get up to that level, we could easily see some profit taking or short position creation.
These traders will want to be cautious however, especially if the index breaks higher and maintains the break.
Also see today's report - There are Still Strong Reasons to Consider Equities
Stock Markets: 10 August 2012
Weak economic data doesn't seem to come as much surprise at the moment and it's almost as if spread trading
investors expect to see disappointing figures on a regular basis.
Yesterday's UK trade numbers did not make for great reading, showing that exports had declined by far more-than-expected.
Of particular concern was the fact that the falls did not just come from our friends on the continent but also from outside of Europe as well.
We can only hope that the Olympics will give a boost to our exports going forward, however, for now people beyond our shores are not rushing to buy the best of British products.
At least the figures were not as bad as the headline might suggest, with the rate of decline in goods exports being half that it was following the financial crisis back in 2009.
We do of course have to factor the Diamond Jubilee into the equation, as this has had a knock on effect for industrial and manufacturing production. However, as the most recent figures showed, this was not as bad as had been expected.
But really the UK data is piecemeal compared to the Chinese figures that the online spread trading markets are focusing on.
The Chinese export data produced rather a shock, and this is causing the sellers to creep into the European markets in early trade.
In recent months, we have seen bad economic numbers actually prop up the markets, as investors consider the prospect of further stimulus from central banks. However, for this time at least, we are seeing some concerns about the world's second largest economy actually knocking the confidence of the bulls.
That said, we are yet to see any substantial move to the downside since the beginning of this risk rally in July. Although there was a minor blip last week when the ECB failed to announce a renewed stimulus package.
The continued strength in equities is being built on the prospect of unconventional monetary policy initiatives and record low interest rates for many years to come.
Growth might be sluggish, but when you've got central banks propping up the economy and attempting to prevent catastrophe, then equities suddenly look like a decent trade. This is, of course, particularly true when the other asset classes are struggling to provide any significant returns.
Last night, American shares were supported by some decent jobs data, as the weekly jobless claims unexpectedly declined. In addition, data also showed that the housing sector seems to be on the mend.
These are two critical ingredients for the US economy, and ones that are currently preventing a dive back into recession.
Nevertheless, there are still significant downside risks for the US economy and the picture in Europe continues to worsen. This kept investors nervous when a former member of the ECB did not agree with the bonds buying plan.
As a result, the Dow Jones index
posted a small loss of 10 points, falling to 13,165 and snapping its four day rally.
At the open this morning, the FTSE is just retreating a little to 5840 at the time of writing.
Overall, Financial Spreads account holders are short of the index, and have been for a number of days now.
Such a stance is understandable as we've tracked sideways all week and there's been little to spur the bulls into further buying action.
Stock Markets: 09 August 2012
Markets are still marching higher despite the fact that the macro picture continues to look increasingly difficult both in the UK and on the continent.
Even though Mervyn King downgraded growth forecasts in yesterday's inflation report, his language was more optimistic about how the economy was positioned to take advantage of any uptick in activity.
But therein lies the problem; it's the uptick that's causing everyone the headache, especially when our biggest trading partners are in the doldrums as well.
Realistically, there isn't a lot of hope for improved growth as we are seeing continued austerity, few working stimulus measures and a locked up banking sector.
On the continent, our French neighbours are on course to suffer their own double dip recession, and they have barely touched their public sector.
Here in the UK, with a banking sector that remains on life support and a private sector that is prioritising paying down debt rather than investing, we could see flat lining growth for some time to come.
Nevertheless, we can't continue to blame the banks for the current lack of lending.
There's no problem in blaming them for the crisis of 2008, and the subsequent travails we are seeing today. However, the banks are now being asked to restore their balance sheets on the one hand and lend like mad on the other.
This is also coming at a time when the risks of lending are huge and many banks have exposure to toxic debt that could be potentially wiped out.
As a result of all this, you are likely to find the economy between a rock and a hard place.
Last night's US session initially saw the Dow slump after comments by a Federal Reserve member.
They suggested that the current level of monetary stimulus is enough and implied that any extra measures might fail to have an effect. However, this was discarded by yet another day when the US corporate earnings surprised to the upside.
The positive sentiment allowed the Dow to reverse its initial losses and post a fourth consecutive session of gains, adding some 20 points to 13,175.
This has given European indices
a bit of a boost this morning, with the FTSE trading at 5850, only just in the black at the time of writing.
Stock Markets: 08 August 2012
On the open this morning, the FTSE 100
started the session some 40 points lower and the index is continuing to languish in the red, hovering around the 5800 level.
Resistance is now seen at 5840 and 5880, while support is where the previous resistance was around 5700 to 5720.
Also see today's report - UK Inflation Should Make for Grim Reading
Stock Markets: 07 August 2012
The FTSE has taken the Standard Chartered money laundering allegations in its stride and is looking to attempt a hat-trick of gains.
Market sentiment continues to be bullish as the ECB's bond buying plans seemed to get the green light from the German government.
The Dow edged higher again last night and, even though it did retrace a little from its highs, this hasn't put off the European bulls.
Industrial and manufacturing production data, due out from the UK this morning, is expected to show how much pain was caused by the extra bank holiday in June.
The ONS has been particularly pessimistic in its forecasts and so the expectations are for month-on-month declines of -3.4% and -4.1% respectively.
Having said that, the most recent manufacturing PMI data did see a surprising rise in output, so there's a chance that the figure might be better than the pessimists are expecting.
Also see today's feature on Standard Chartered Shares Down Nearly 20% on Money Laundering Allegations
Stock Markets: 06 August 2012
Global equity markets
have been staging a rally that has caught many people by surprise and it's the US markets that are leading the way.
The FTSE has been attempting to get back above the resistance levels between 5700 and 5715 for some time. On Friday, the index managed this with ease.
The much better-than-expected Non-Farm Payroll figure actually saw markets react as they should do following some good economic numbers.
For months now the US economy has been wavering and we've highlighted the possibility that they might soon follow Europe into a recession. However, Friday's data confirms that they aren't going down without a fight.
The US labour market has managed to be quite resilient in the face of slowing economic activity and the housing market has also shown signs that it is on the mend.
As a result, the Dow Jones rallied sharply on Friday, gaining over 211 points to 13,096. This included a huge gap on the open, as the move effectively reversed the week's earlier downtrend, allowing the bulls to quite literally end on a high.
Investors were also cheered by the news that Angela Merkel's party in Germany approved the role of the ESM, the Eurozone's permanent bailout fund, albeit in its basic form.
This is good news for Mario Draghi's stimulus measures and is yet another step towards the ESM getting the sort of power such as a banking licence that so many people want to see.
But the legal wrangling between reluctant politicians and lawmakers continues and Germany remains steadfastly against the move to approve a banking licence.
This is what the online spread trading
markets are crying out for and pressure is mounting on Germany from all angles, including from France and Italy.
At some point the Germans may have to succumb as this is one of the first major steps to help drive borrowing costs lower and prevent a break up of the Eurozone.
Despite the excitement of Friday's big rally, and the addition of more Olympic medals to team GB's haul, the economic outlook doesn't look any better for the UK.
This week sees the BoE's inflation report which is expected to paint a gloomy picture of growth prospects and we could even see the economy flat line throughout 2012.
The rest of the week is very quiet in terms of economic data and there's nothing for us to get our teeth into today.
Volumes could remain thin today, as the train into work was emptier than in previous days and the track and field events continue.