Stock Market Update 22 February 2013

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Stock Markets: 22 February 2013

What a difference a day makes. Yesterday, the FTSE 100 fell from the dizzy heights of 6400 to below 6300 in a single session, with triple digit losses being recorded by most European indices.

Overall investor sentiment seems to remain largely bullish and so the recent weakness could be perceived as a buying opportunity.

So far this year, we've seen that any pullbacks have been met by buying, but this rally has not exactly been supported by substantial volumes.

In contrast, yesterday's decline saw pretty strong volumes and some technical analysts may think that this points towards further weakness.

In addition, many bulls have been waiting on the sidelines and, whilst yesterday's fall was not insignificant, they may want things to get a little cheaper before they dip their toes back in.

Having said that, it looks like some of those bulls are looking to dive in already. Despite falling at the start of the session, the Dow recovered from its lows later on and so the FTSE is opening some 20 points higher this morning, taking it back above the 6300 level.

Time will tell whether yesterday's falls really have presented investors with another buying opportunity, but for now we have two important political events to contend with.

First up is this weekend's Italian election. At the moment, the financial markets seem to be fairly unconcerned with the risks, but all eyes will be on the result.

Expectations are for a Bersani victory, but there is a possibility that we will see a hung parliament or even a return of Berlusconi.

The second major political risk is the US sequester, which has not received anywhere near as much coverage as the original fiscal cliff at the end of 2012.

All the same, this probably warrants more attention given that the opposing parties remain at logger-heads with time running out.



Stock Markets: 21 February 2013

The economic calendar is quite busy today and we've already seen some French manufacturing data come in flat, with the German figures due for imminent release.

We will then have UK PSNB data, followed by US CPI data and housing numbers over lunch and we end the day with the Phili Fed.

Also see today's feature US Federal Reserve May Look to End Quantitative Easing.



Stock Markets: 20 February 2013

The economic calendar is a little more packed today and we've already seen French business confidence numbers beat expectations.

This complimented yesterday's consensus smashing German ZEW survey, which hit 48.2 compared to the forecast 35.3, and has gotten the session off to a good start.

UK labour market figures are due at 9:30 and the funny disconnect between the wider economy and the jobs market is set to continue, with expectations that the claimant count will fall.

Interestingly, many of the past few months has seen the claimant count fall when it was expected to rise, so there's every chance that the forecasters will be bamboozled once again and we may see a rise.

Regardless, the number of jobs has been remarkably strong considering the UK's flat lining economy, so it will be interesting to see if that stength continues.

At the same time, we will also see the latest BoE minutes, where a vote of 8-1 on QE is expected to be reported.

Having said that, the main focus will be their inflation discussions as the latest BoE Inflation Report made it clear that above target inflation is here to stay.

Also see today's feature Dow Jones Hits 5 Year High.



Stock Markets: 19 February 2013

For this morning, however, European index markets are a little softer on the open, with the FTSE 100 a few points in the red but managing to hold onto the 6300 level.

Our spread trading clients are still short of the indices overall, and the FTSE 100 in particular. They seem to be hoping that the potential turmoil will produce a large sell off in risk assets.

The economic calendar starts getting busier today as we have the widely watched German ZEW survey this morning.

This is expected to show an improvement in economic expectations and current conditions which may indicate a bounce in the country's economy after the contraction revealed last week.

Also see today's feature US and Italian Politics Could Mean Fireworks for Investors.



Stock Markets: 18 February 2013

Things are likely to be quiet on the markets front today, as the US is on holiday for Presidents Day.

Last week ended a little sourly after disappointing results from the bellwether retail company in the US, Wal-Mart. This drove equities lower, with some investors looking to adopt a wait-and-see stance rather than go in too early.

Nonetheless, consumer confidence data rose by more than expected and this may signal that the overall sentiment remains optimistic.

The result for the Dow Jones was rather mixed, but the session ended with a small victory for the bulls as the index closed 8 points higher at 13,981.

Understandably, the small rise means that European markets are flat on the open, with the FTSE starting the week at 6325.

With very little economic data due out, the quiet session in the US is likely to be replicated on this side of the Atlantic.

Generally, clients remain bearish about the prospects of the major stock market indices, and particularly the US indices, which are still hovering around their five year highs.

Also see today's feature Are We Seeing an Escalation of Currency War? (Part 2).



Stock Markets: 15 February 2013

Yesterday, US stocks started deep in the red but recovered from their lows after a report from the US Labor Department.

The report indicated that the jobless claims figures declined by more than anticipated, to 341,000, which kept investors optimistic about the employment sector.

Nevertheless, the Dow was unable to claw itself into the black as Europe painted a gloomy outlook with Germany, France and Italy all showing a drop in GDP.

As a result, the Dow Jones ended just shy of 14,000 once again, closing at 13,975.

This morning, the FTSE is also just in the red as investors continue to contemplate the recent strength in equities so far this year.

Many are sitting on their hands ahead of the G20 summit that gets underway today.

Overall, our CFD trading clients remain bearish of the FTSE and particularly the US indices, which remain around their highs.

Also see today's feature A Transaction Tax will Make Investing, Trading and Pensions More Expensive.



Stock Markets: 14 February 2013

Last night, it was something of a surprise to see the Dow Jones slipping from its highs.

US President Barack Obama sparked a morning rally in stocks and shares with his State of the Union address, which focussed on infrastructure spending, healthcare and green energy investments. He also called for a rise in the minimum wage to $9 an hour.

Nevertheless, this didn't stop the Dow from retracing towards the close, dipping back below 14,000 to close 35 points lower at 13,982.

As we approach the record high of 2007, it looks like the temptation to take profits is increasing.

As mentioned, European stocks are slightly lower this morning, with the FTSE trading at 6355.

Our account holders were caught completely off guard by yesterday's move higher, with the majority of clients remaining short. Having said that, we have seen a few more sellers creep in over the past twelve hours or so.

Also see today's feature German and French Growth is Worse Than Expected.



Stock Markets: 13 February 2013

Whilst the FTSE is due to dip on the open today, owing to a large number of dividend payouts, the index remains firmly above the 6300 level after yesterday's bank driven rally.

In addition, another round of better-than-expected US corporate results finally saw the Dow Jones close above the 14,000 mark, its highest close since 2007.

Investors' bullish mood has since been encouraged by President Obama's State of the Union address, which entertained the idea of reducing the budget deficit by pushing for economic growth.

Particular targets for spending will be clean energy and infrastructure, yet there was no major move towards significant spending cuts which the Republicans are pushing for. As we move towards the end of the month, the sequester is looming.

Early in this morning's session, the FTSE is trading higher than our original pre-market calls.

It looks like banking stocks remain popular and now the sector starts reporting in earnest.

Out of the banks that have reported across Europe so far this season, more than half look to have beaten analyst expectations. As a result, the sector remains popular, even if there have been some slightly mixed results.



Stock Markets: 12 February 2013

European equity markets have been nervous of testing their recent highs and understandably so.

We are nearing the deadline for US politicians to agree on exactly how to deal with the postponed spending cuts from the original fiscal cliff negotiations.

Despite US markets continuing to hover around their recent highs, and even testing them, European investors seem to be more wary of the volatility that can arise from such political negotiations.

Later today, Obama will give his State of the Union address but this will come after the US markets have closed so we cannot really expect any market reaction until tomorrow.

Most financial spread trading investors seem to see this as the major risk event at the moment and so even the Dow Jones stopped for a breather yesterday, closing just in the red at 13,971.

Markets have suffered from a lack of direction so far this week as there's been an absence of significant economic data. As a result, there's been little incentive to push for new highs.

So far this morning, the FTSE 100 has taken things in its stride and is just trading in the red at 6270.

Clients have yet to see the recent retracement as a major buying opportunity and there remain quite a few sellers of the index.

They are clearly expecting the FTSE 100 to catch up with the falls of the CAC 40 and DAX 30, which have suffered from rather more selling pressure.



Stock Markets: 11 February 2013

Barclays is attempting to lead the changes within the banking industry and the headlines are full of some of their plans ahead of tomorrow's final results.

By closing down their tax avoidance arm, Barclays are clearly trying to change their image after Bob Diamond's attempt to make it an impressive force in the investment banking world.

The new CEO Anthony Jenkins is preparing the bank for a natural move away from many of the investment banking operations, as well as a trimming down some of its retail and commercial banking sections.

Since the departure of Bob Diamond, the investment banking section was never going to be the same under new stewardship, but the investment banking landscape is going through seismic changes anyway.

Not only are major cuts being made across the industry, with divisions such as equities being one of the worst hit, but the changing regulatory landscape is making things harder for them too.

We are also unlikely to have seen the last of the scandals so, no matter what changes are made, the consistent 'bash a banker' rhetoric will be around for a while to come.

On Friday, the US trade deficit narrowed by more than expected in December and this was accompanied by yet another set of positive corporate earnings.

Together, they fuelled the growing optimism that the world's biggest economy is on a path of sustainable recovery.

The Dow Jones rose to its best level since 2007, although it couldn't quite close above 14,000, instead choosing to end the week at 13,992, up some 50 points.

This morning, European indices are rather mixed, with the FTSE just about creeping into the black after starting off in the red.

The index is at 6270 at the time of writing and our spread trading account holders seem to still seem to be largely on the bearish side of things, expecting further weakness to come.


By Simon Denham, 22 February 2013


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