Stock Market Update 17 February 2012

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Stock Markets: 17 February 2012

US markets continue to ignore what's going on in Europe as they rally higher putting the Dow Jones in touching distance of the 13000 level.

Across the pond things are very different to what is happening in Europe with the economy growing and unemployment falling.

Yesterday initial jobless claims and manufacturing data came in better than expected which led to a strong rally for the likes of the Dow Jones, S&P and Nasdaq. These stock market indices are now very close to making new highs for the year with the tech stocks about to mark new record highs.

It goes to show that there is a disconnection between US and European markets at the moment. European investors remained engulfed with the concerns over Greece, however other parts of the globe are either bored of talking about the sovereign debt crisis or oblivious to the consequences of a major fallout.

Last night's rally in the Dow Jones is allowing the FTSE to wipe out any recent losses making any falls a thing of the past.

The fact that any dip is being met with buying shows that the bulls are reluctant to give this rally up without a fight, pushing UK shares to near six month highs.

At the time of writing the FTSE is at 5915 and bulls seem to have their tail up as they target the 6000 level. A break above near term resistance at 5920 could see a test of 5955 and beyond. To the downside support is seen at 5855 and 5830.

Stock Markets: 16 February 2012

You'd be forgiven for thinking that parts of Europe were gearing up for a war after the comments that have been made flung around the continent in recent days.

Greece's Prime Minister has had some harsh words for Europe's paymasters as those controlling the coffers are withholding the latest planned bailout.

The lack of trust from the likes of Germany, France and other countries that Greece will not actually implement the agreed austerity measures is fuelling a loathing amongst the Greeks, especially against the Germans.

You can't blame the paymasters though as they've seen the Greek mess around before, promising real reforms only to get the cash and then not implement the promised changes.

With elections due just after March 20th when the next bond repayment is due there's nothing to say that any new ruling party won't simply say thanks for the dosh and then refuse to make the cuts.

Obviously there'll never be a war in Europe but the rhetoric is worrying. Greece is heavily reliant on German tourists who flock each year to their hotels, islands and beautiful beaches. However, many of those having second thoughts and are choosing not to go to Greece for fear of reprisals.

The bailout funds are still not guaranteed and this is rattling markets this morning after having affected the trading session in the US yesterday.

The declines across the pond have filtered through to European trade with the FTSE 100 lower by some 50 points to around 5840.

This move lower has brought the index below some important near term technical indicators and brings us to quite a major support area around the mid 5800 region. The technical analysis suggests that further weakness below here could open up the way to 5800.

Stock Markets: 15 February 2012

The Eurozone received a massive boost yesterday as China pledged to invest in the European bailout fund and also keep hold of it's euro assets.

It comes just as Greek leaders are putting budget cuts in place, in return for their second bailout.

They are hoping to get the €130bn plus the €100bn of debt relief in time to make a €14.5bn euros bond payment on March 20.

However, the meeting today of Eurozone finance ministers has been cancelled, and will instead take place via telephone conference. There remains speculation that Greece won't be able to stick to the austerity measures they originally claimed they were to put in place.

Germany may swerve a recession as Europe's biggest economy shrank less than economists forecast for the fourth quarter.

Their GDP fell 0.2% from last quarter compared to an expected 0.3%, which has provided for some moderate optimism.

The UK 100 market finished slightly off par yesterday at 5899.8, after climbing 0.9% on Monday. This came as investors pulled out of banks and miners and put their hard earned cash into more defensive sectors on the back of disappointing data from the US Retail Sales, spurring concerns over the strength of the economic recovery.

On the macroeconomic front, the main focus for UK stock market futures investors will be the British Unemployment numbers being released at 09:30 GMT, closely followed by the Bank of England's inflation report at 10:30 GMT.

Across the pond, data comes in the form of February's Empire State Index at 13:30 GMT, National Association of Homebuilders Index at 15:00 GMT. Perhaps most importantly the minutes from the last Federal Reserve FOMC meeting are being released after the UK close at 19:00 GMT.

Stock Markets: 14 February 2012

Moody's have highlighted something that we've mentioned quite regularly in this comment which is that the UK is not immune to having its prized triple A credit rating from being stripped away.

The ratings agency highlights that it had not done this before because the country had been quick to start tackling the deficit, but now that growth is being impaired the deficit reduction targets are looking unlikely to be hit.

The likelihood of an actual downgrade is put at around 30% chance, so significant and ever more likely if growth doesn't pick up.

The news from Moody's has not led to a mass sell off, but there is a degree of weakness in the indices this morning as the UK 100 opens below 5900 to 5888 at the time of writing.

Stock Markets: 13 February 2012

Greeks politicians have voted to take their medicine and so indices contracts for difference markets are rallying in relief that a rejection of the vote has not lead to the country's exit from the Eurozone.

Their politicians were able to persuade the majority that the alternative will be far more painful if they were not to pass the austerity measures, and now Europe and the IMF will want to see their words put into actions.

There are still negotiations that need to be completed such as the actual sign off by the troika and then the agreement on the private sector's bond write down.

If Greece does actually stick to an approved plan then the resultant recession will be long and hard. However, as reminded by the politicians, the electorate needs to appreciate that such drastic action is required in order to get the country back on the road to being more competitive. The ultimate recovery will be necessary if they want to remain in the Eurozone.

If the vote hadn't been passed then exit from the euro club would have been imminent. The return to the drachma would have damaged the country's dignity even more than it already has been, but the resultant recession would have been far deeper and longer than what's being put on the table today.

The rest of Europe will be unlikely to call for further austerity, but will be watching very closely to ensure that, in the run up to the elections in April and beyond, the promises are implemented.

At the moment few know what a new parliament in Greece after April will look like. There's always the chance, as we've seen before at the end of last year, for a politician to pander to the populist vote in order to get into power and not actually implement the measures just passed by their parliament.

One thing is for sure; all this vote does is buy time and doesn't guarantee the country is immune to default or exit in the future.

But for now the news comes as a relief for investors who are pushing risk assets higher. The FTSE 100 CFD market has recovered back to the 5900 at the time of writing having gapped higher on the open.

Having seen a minor break to the downside on Friday once again the buyers have seen the weakness as a buying opportunity and we are firmly back in the narrow trading range of last week.

Stock Markets: 10 February 2012

So a deal has finally been agreed and now the hard work begins. As is usually the case with CFDs, investors seem to have bought the rumour and sold the fact as European indices have opened in negative territory this morning.

Even if a deal has now been struck, firstly the Greek government has to pass it into law over the weekend, in the face of desperate opposition from the electorate, and secondly there's no guarantee that Greece won't default later.

They will be delighted that they're due to see some three quarters of what they owe disappear and in return the bitter medicine of austerity has to be swallowed in order to receive the next bailout.

All of this still remains hypothetical of course as Europe and the IMF has insisted that these measures are enshrined into Greek law and until that happens there's no guarantee that the deal agreed will be implemented.

This is why the markets remain on a cautious footing this morning as the parliament could easily reject the reforms which will almost certainly mean time has run out and a default is inevitable.

Then is then of course the big question about what other countries will be thinking and how the market will react to the likes of Portugal, Ireland and Italy. We will have to wait and see.

Throughout this morning ahead of the open, European index futures have gradually been sliding and so the UK 100 is firmly in the red around 5865 at the time of writing.

Bearish futures account holders will be breathing a sigh of relief, but this will once again test the mettle of the bulls to see if they still have the appetite to buy on the dips.

They may not ahead of this weekend as a failure by the Greek government to pass the austerity measures into law will give a shock to markets come next Sunday night and Monday morning.

There's not much in the way of economic data today which comes in the form of producer prices from the UK, some similar data from Europe and then a trade balance from the US. The main focus is likely to be Ben Bernanke's speech later on this afternoon.

Stock Markets: 09 February 2012

The movements in markets yesterday can hardly instil confidence but once again US shares largely ignored what's going on in Greece to post a tiny gain after having been in negative territory for most of the session.

The late strength that lifted the Dow from its lows towards the end of the session has translated into a relatively positive start to trading in Europe this morning.

All eyes remain on Greece and until a deal is struck it's hard to see any major move to the upside or downside.

So the FTSE 100 is flirting with the 5900 level again after not being able to hold onto it yesterday.

Our financial spread trading clients remain, on the whole, convinced that some sort of move to the downside is due as they remain largely bearish of the index. The major hurdles for the index are 5915/75 and 6100 to the upside meanwhile 5550 and 5330 to the downside are seen as support over the medium term.

The FTSE market has done precisely nothing so far this week, trading in a miserable range of just 65 points, so the tension building up could result in a sharp move in either direction soon.

Stock Markets: 08 February 2012

The FTSE 100 has opened a few points higher this morning, currently trading above the 5900 level, as investors remain willing to buy into risk on hopes that the Greek deal is looming.

Having said that, our stock market futures trading clients are continuing to oppose the upward move; they clearly feel that the rally has to reverse sooner or later.

There really is nothing to write home about on the economic data front and really the only thing worth monitoring here is the oil inventories due out later this afternoon.

Stock Markets: 07 February 2012

The CFD markets have been moribund so far this morning.

The FTSE is flat hovering just below 5900 as investors continue to focus on what's happening in Greece, which is basically nothing.

The real deadline has been set at next Wednesday as this is apparently the time at which a resolution has to be agreed upon in order for the necessary legalities to be formalised ahead of the 20th March bond exchange.

Otherwise its default time and Greece really will exit the euro.

Even though the possibility of such an event is becoming more and more likely the markets have remained surprisingly strong.

This is particularly interesting since many analysts have been increasing the likelihood of a Greek exit and the politicians there have been discussing it themselves.

Whilst the country has benefited hugely from being a part of the euro, the situation now makes exit a laudable outcome. They'll have all their debt wiped off and their currency would plummet, devaluing it massively and assisting in the country becoming competitive again.

If the next bailout does go through then you can safely suggest that we'll be discussing the Greek issue again in the near future.

Stock Markets: 06 February 2012

After the mega gains of last week markets are just pausing for breath at the moment as a little froth is being taken off the top this morning.

The UK 100 is just a few points lower, under the 5900 level that it only just closed above last week. The euphoria from the Non Farm Payroll figure which sent the markets skywards on Friday just seems to have died out as the focus goes back onto Greece.

Things are very quiet today on the economic data front as German industrial orders later this morning will be only thing worth keeping half an eye on. The number is due to rise, but won't be enough to prevent a quarterly decline for Q4 of last year.

The result of last Friday's NFP figure gave the dollar a short lived rally, as traders suspected the increase in jobs would encourage the Fed to ease its monetary policy. This morning the focus is back to the Eurozone and Greece again attempting to reach an agreement with their creditors.

By Simon Denham, 17 February 2012

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