Stock Market Update 20 January 2012

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Financial Spreads: Spread Betting and CFD Trading

Stock Markets: 20 January 2012

Yesterday saw a few rays of sunshine for the Eurozone as Spain and Portugal managed to not only find buyers for their debt but also keep the interest rates low.

This aided the improved sentiment we have seen this year and helped the FTSE break through and close above the 5700 to 5720 area. The next target level for the bulls is 5770, October's high.

A strong performance from US markets, particularly the Wall Street index, is also assisting European markets and so we have seen the FTSE has open at 5740 this morning.

This has seen the stock market index move clear of its 200 day moving average on the daily chart, which we have also seen from the US markets as they continue to move.

Stock Markets: 19 January 2012

This morning, the FTSE 100 spread trading market remains in undecided territory which is where it has been for the past few days.

A bit of encouragement for the bulls yesterday is that the index managed to close above 5700, however it is still yet to break the back of resistance at 5720 or even test last October's highs around 5770.

Hovering around 5700 again at the time of writing, indices investors seem keen to watch how things unfold in Greece and whether a deal can be struck over the restructuring of its debt.

Stock Markets: 18 January 2012

Markets continue to remain strong in the face of mounting concerns over the European debt crisis.

The FTSE is up some 2% so far this year and any dips seem to be met with decent support and buying that takes us back towards the highs.

Yesterday saw the index fail once again at the 5720 level which is a cause of concern for the bulls but European indices look strong, forging ahead to new highs as opposed to struggling at their resistance levels.

With the German DAX and French CAC leading the way it could only be a matter of time before the FTSE gets trough this near term resistance barrier and tests the highs from October last year around 5770.

The DAX in particular yesterday was in flying form following the ZEW survey, which was still negative but jumped the most since records began.

This was what supported the German index yesterday, edging it ever closer to test its 200 day moving average on the daily chart, and this morning the index is expected to commence just in the black.

The FTSE meanwhile has remained above its 200 day moving average for the whole year so far and it would seem that it is simply allowing its European counterparts to catch up with it.

This morning the FTSE was expected to commence fairly flatish but once we got underway we were indeed in the red at around 5770.

Financial Spreads' clients remain bearish with overall short positions on the FTSE expecting the near term resistance to stand firm and the index to become over powered by the European situation again.

Stock Markets: 17 January 2012

China has proven today to some degree that the argument between a soft and hard landing is slowly being won by the soft camp.

Their GDP figures overnight were always going to be a focal point of trade today as we remain heavily reliant on the Asian economies to fuel global growth.

As a result, when the number came in at 8.9%, higher than the expected 8.7% it resulted in a strong rally for base metals which has followed through to mining stocks so far this morning.

Previously in this comment we have noted that China is very different to Western economies and therefore Western thinking. With their considerable reserves they have the firepower to bring things down slowly if they want to and for now the plan seems to be working.

With the world's second largest economy still growing near 9% the prospects of a global recession are limited, even if things in Europe continue in the fashion they are going.

The increased optimism in equities seen throughout this year is very encouraging for the outlook in 2012. The old statistic that the equity market will have a positive year if the S+P 500 finished higher after the first five days of trading is certainly looking to play out, although it is very early days.

At the time of writing we are calling the Dow to open higher by 120 points from its close on Friday. It will be interesting to see whether that can be maintained when US investors get back into their offices later this morning after their long weekend.

Often you see that US futures don't like being led by European markets and can reverse their move, however this time round the rally might be sustained simply because of the GDP data from China. Currently the Dow is marking a near 6 month high.

Our spread trading account holders remain sceptical however, presumably with the belief that the Eurozone woes will rule. Selling into the recent strength has left them nursing a few wounds this morning.

Stock Markets: 16 January 2012

After a nervy end to trading last week investors remain cautious following the S&P's downgrades of the likes of France and other European countries.

It acts as a stark reminder that all is not well within the Eurozone and the main threat now is not that other ratings agencies might follow suit, but that the EFSF bailout fund might be next.

With talks for dealing with Greece's debts breaking down last Friday there was a double whammy for the markets as fears over an eventual default increased, most likely in March when their next bout of refinancing is due.

Without the full backing from Germany to back Greek debt and turn it into an attractive investment, the Greeks have pretty much no hope of staying in the Eurozone.

The money presses are standing by to be restarted and dish out Drachmas after they were put on hold just over ten years ago.

The index contracts for differences markets suffered decent losses on Friday as the rumours of the downgrades spread, but not quite as much as you might expect since investors knew that France and others were on the S&P's downgrade watch list. Once it became apparent that the rumours were true, the market recovered from its lows.

This morning a bit of weakness has greeted the early session, but at the time of writing a few bids are pushing the market higher.

The FTSE had consistently been called to open some 10 to 20 points lower than it did and since then it's been drifting higher, however caution seems to remain the order of the day so far.

With US shares closed for Martin Luther King day, trading will probably be thin and there's no economic data due for release.

The FTSE may have had a decent start to the year, albeit slightly spoilt by Friday's decline, but it remains rather range bound, capped by strong resistance up at the 5700/20 area and support seen around 5350.

If we cast our memories back to the first half of 2011, the FTSE spent months trading within the same range before finally breaking out to the downside.

With so much uncertainty surrounding the Eurozone it's hard to see the market rallying to new heights, but at the same time there just seems to be enough optimism there to prevent a major crash.

Stock Markets: 13 January 2012

The FTSE 100 this morning is faring well after strength from US shares in the latter part of its session last night fed through to the Asian markets.

Riskier equities continue to attract the buyers with miners doing well which gives you an indication that risk appetite is building. At the time of writing the FTSE is trading at 5700 and the index has that near term barrier to test around 5720.

Things are relatively quiet on the economic data front today, with nothing like a Non Farm Payroll due, but an Italian bond auction will be a focus following the success of yesterday's Spanish auction.

So far this year European debt has been bought and yields have been driven down so this is also helping to translate into a bit of fresh risk appetite amongst equity investors.

Stock Markets: 12 January 2012

A little bit of strength from the US markets towards the end of their session is translating into a mildly decent start for European equity markets.

China still plays a huge part in the whole game and a fall in its inflation has been seen as a good thing as it should mean some policy easing from the People's Bank of China.

There's been a huge amount of debate about whether there's going to be a soft or hard landing for China's economy in 2012 but the bottom line is that their economy is already landing. But probably at an airport in the mountains as opposed to the lowlands of flat growth.

It's not only in the world's interests that China continues to grow fast, but it's in their own and you can expect their policy makers will want to keep things that way.

The open of the FTSE has taken a little turn for the worse as we were calling the index to open higher by some 10 points but we have commenced the session 10 points in the red.

The 5700/20 level remains the major near term hurdle for the index and if the bulls can get us above here, the next resistance is seen at last October's highs around the 5770 area.

Stock Markets: 11 January 2012

A little bit of profit taking this morning gives the bulls a time to reflect on the decent start to 2012 for CFD trading markets so far.

It is interesting that our calls have not been higher ahead of the open considering that Asian indices continued their strength and the Australian 200 index made mild gains, with mining stocks benefiting from higher copper prices.

At the time of writing the FTSE is just in the red at 5690 as it seems to be finding the 5700/20 area a bit of a struggle for now.

Over the medium-to-longer term this rally might have a little further to go as long as the indices remain above their 200 day moving averages on the daily charts. The Dow has been comfortably above here since the middle of December, however the German DAX is yet to even achieve this.

Stock Markets: 10 January 2012

The strength from the indices futures markets this morning comes somewhat as a surprise considering that the rhetoric from European leaders seems to be focusing more on the possibility of a Greek exit from the Eurozone.

Whilst the drivers behind the new EU treaty maintain that a break up in any form is not desirable, they are starting to accept that Greece is a "special case" and becoming more and more likely to leave.

The optimism though is probably coming from the fact that Merkozy are hoping to bring forward the deadlines for agreement on the new treaty and have it all in place by March. In addition this would come with plans to stimulate growth as their "second pillar" part of the plans.

This is all very ambitious and there's still a huge amount of detail that's required to be fleshed out. Not least is the issue of how a new treaty will be enforceable when one of the EU's biggest economies and contributors to the EU's coffers is not taking part.

The hope of focus shifting away from Europe in 2012 has been quashed as investors continue to look at how various bond auctions and summits go as opposed to the economic data and corporate results which have been surprisingly positive.

US investors remain optimistic of a positive year for equities in 2012. For those statisticians out there, the chances of a rally in equities for the year have just been enhanced, at least from a historical standpoint, by the S&P 500 closing higher after the first five days of the year.

The Dow Jones also continues to hold onto the ground above its 200 day moving average and looks poised to have a go at marking new highs. This comes following good numbers from Alcoa, despite being loss making, as the US earnings season gets underway.

European markets are being propped up US and Asian markets and one has to think that if it wasn't for the European sovereign debt crisis the Dow would probably be forging ahead to a new all time high.

Stock Markets: 09 January 2012

Traders are ignoring the continued concerns over the Eurozone this morning as the FTSE commences the week on the front foot.

A presumptive start to trading as perhaps there's a degree of optimism that this week's kick off European meeting between the French and German leaders will be the start of something more meaningful.

As the month goes on we see further European meetings and climax with a summit at the end of it.

The agenda is shifting slightly towards how to stimulate growth which many see as folly when you consider how the situation remains dangerously close to seeing a break up of some sort.

Towards the end of last year the likes of Sarkozy and Merkel were even discussing the possibility of Greece exiting the Eurozone and now they seem to be assuming that that's not going to happen.

Other things on the agenda will be the financial transaction tax which led to our Dave's infamous rejection of the new European Treaty last months.

Even though the majority despise bankers, a vast amount of financial transactions are not just made by banks.

A large proportion of the financial services sector makes these sorts of transactions all the time, Financial Spreads included. As a result, the costs are likely to knock growth to such an extent that the taxes reaped from it are lost to reduced GDP and tax revenue elsewhere.

Despite this Sarkozy seems hell bent on trying to implement it across the whole of Europe, including the UK even if we do veto it. This will be an interesting battle going forward.

We had been calling the index to open lower this morning by some 25 points but it has actually opened to the upside somewhat surprisingly. At the time of writing the index is at 5565.

The UK index has got off to a mildly positive start for the year and across the pond the Dow Jones has had a comparative January so far.

The first few days of January are considered to be a good measure for the remainder of the year and even if things might have been a little shaky, we're up almost 2% which bodes well for equities going into 2012. It indicates that despite the headwinds, there is a degree of risk appetite out there.

By Simon Denham, 20 January 2012

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