Stock Markets: 22 March 2013
Looking ahead, this coming Monday could be just as volatile as last Monday. Having that said, we had been calling the FTSE 100 to open quite a few points lower at around 6360. Nevertheless, at the open the UK index isn't doing too badly and, at the time of writing, is only trading down at 6380.
In trying to rescue its banking system, Cyprus struggles to find a plan B after rejecting the deposits tax suggested last weekend.
However, a Russian rescue is not on the table yet. Any such rescue could, according to press speculation, require a compromise on the newly found gas reserves near the southern shores. This meant that worried forex investors headed to the exit door yesterday, pushing the euro 34¢ down to $1.2898.
Also see The Cyprus Banking and Bailout Crisis - Part 3
Stock Markets: 21 March 2013
Now that the dust has settled from yesterday's UK Budget, the focus is back on the Eurozone and Cyprus.
Markets remain in a state of flux as Cyprus battles to avoid a default and exit from the single currency.
As long the small island fails to reach a deal, the prospects for any further gains in risk assets remains slim.
The banks can't remain closed forever and there's no knowing what will happen when they reopen, which is now expected to be as far out as next week.
Regardless, when they do finally open, the likelihood is that people will be frantically queuing up to withdraw their funds.
Of course, whether those funds will have had a levy applied to them is yet to be seen, but another proposal and a vote on that is expected today.
Who knows what will happen or what deal will be struck, but one thing that investors have learnt is that they should expect the unexpected.
Despite all the uncertainty and the potential for the little island to be booted out of the Eurozone, the online spread trading markets have held up remarkably well.
It is still hard to believe that such a small member of the single currency could potentially rip the Eurozone apart.
The problem is that if it can't raise the cash it needs to avoid a default then it will have to exit. This would set a precedent that could pave the way for other countries to default on their debt and exit as well.
This would well and truly set the dominos falling and could lead to a massive sell off in the markets.
If that did happen then those clients that have resolutely held onto their short positions would be making hay.
Yesterday, the Dow rebounded 55 points to 14,511 after retracing for a few days, largely on the back of the Federal Reserve's reassurance that it will keep buying bonds to spur economic growth.
At its interest rate meeting yesterday, the FOMC
left the benchmark rate unchanged, reiterating that it will stay near zero as long as unemployment remains above 6.5%.
At the same time, they forecasted economic expansion of between 2.3% and 2.8%, marginally lower than expected.
This encouraged the FTSE to open slightly lower this morning, but in the early stages of the session the UK index has come under some additional selling pressure.
Some really bad, and far worse-than-expected, German PMI data has been released which is really weighing on stocks and shares
At the time of writing, the stock market bears have pushed the FTSE back below the 6400 level to 6390.
Stock Markets: 20 March 2013
It's Budget day and the Chancellor will have sharpened not only his pencil, but his axe as well.
Whilst the headlines of further cuts may not make for great reading, they are becoming more necessary to reduce the size of the state and to have some sort chance of meeting the fiscal targets.
At the same time, the difficult balancing act of spurring growth remains a significant challenge and some of the measures leaked so far barely touch the sides.
The couple of billion that is expected to go back into capital expenditure looks like far too little, too late when you consider what capital expenditure used to be.
The newswires are readying everyone for a grim budget and maybe this is the sort of build up the Chancellor needs in order to under promise and over deliver.
His past Budgets have been nothing other than PR disasters, with leaks promising renewed growth measures but headlines afterwards focusing on granny and pasty taxes.
Maybe this time, with expectations for a grim Budget, we might just see an inspiring one; wishful thinking many might say.
Yesterday saw a mixed session both in Europe and across the pond as the focus remains on Cyprus.
Despite the latest bout of better-than-expected US economic data, the Cypriot banking crisis showed that the Americans are not yet insulated from renewed European debt problems.
The Dow Jones
ended flat at 14,455, discarding the ongoing rebound in the construction sector where building permits surpassed estimates.
This morning, the FTSE seems to be defying gravity as we had been calling the index to commence the session flat around 6440, but we've already opened 30 points higher at 6470.
Interestingly, many might have thought that last night's vote rejection by the Cypriot parliament, and subsequent extension of bank closures, would have sent investors to the hills and peripheral borrowing costs soaring, but that simply hasn't happened.
Having said that, our spread trading
clients have remained short of the FTSE 100 overall, probably thinking that contagion could creep through to the likes Spain and Italy. For now though, that doesn't look to be the case.
Not only do we have the UK Budget today, but there's a great deal of other economic data out, with UK unemployment and the BoE minutes this morning.
Then, from the US this evening, the FOMC meeting could provide some volatility later on.
Stock Markets: 19 March 2013
As with European markets, the Dow Jones recovered from an initially weak open, reversing course and even paying a very brief visit into positive territory, but still settled 60 points lower at 14,450.
This has caused European indices to commence their sessions in the red, with the FTSE
down some 15 points at 6440.
Clients had been on the short side ahead of yesterday's sell off and remain very bearish of the FTSE at the time of writing.
This is quite interesting as we would normally expect to see investors using the move lower as a chance to buy.
This is clearly not the case at the moment as our spread trading and CFD trading account
holders continue to think that the index has further to fall.
Given all the uncertainty that's currently surrounding the Eurozone, this doesn't seem like an unreasonable view to take.
There's a lot of data to absorb today, with UK inflation data, a Spanish bond auction and the German ZEW survey all due this morning.
Later today we will also see US housing starts but tomorrow is going to be very busy for the UK in particular, with unemployment data and the Chancellor's Budget.
Also see The Cyprus Banking and Bailout Crisis - Part 2
Stock Markets: 18 March 2013
Last Friday, the Dow
finally succumbed, failing to continue its impressive run of gains by declining a few points to 14,514.
Of course, following the Cypriot bailout plans, we are currently calling the Dow to open lower by about 90 points but there are already some opportunistic investors trying to jump back in.
We can also see this in the UK spread trading market, with the FTSE opening at 6425, which is much higher than we had been calling it earlier at 6350.
The real test will be whether this sell off attracts the buyers and, for now at least, there do seem to be some investors willing to ignore the uncertainty surrounding Cyprus.
Also see The Cyprus Banking and Bailout Crisis
Stock Markets: 15 March 2013
Yesterday, the Dow impressed again with its tenth straight gain in a row.
Amid a surprise drop in the US jobless claims figures, investors took advantage of the bullish momentum to push the Dow Jones 80 points higher to 14,540.
Once again, that positive sentiment is rubbing off on European indices this morning.
At the time of writing, the FTSE has just come back from our earlier calls of a positive open and is trading flat around 6530.
With triple-witching today, there might be a little volatility ahead of options and futures expiry and things could get more exciting later on with US data due this afternoon.
Also see today's feature King Stops GBP/USD Decline but for How Long?
Stock Markets: 14 March 2013
Yesterday, the Dow remained true to its current form by moving up to 14,455, even if that was only a gain of 5 points.
This was the index's ninth consecutive gain and is the longest winning streak since 1996.
The index was buoyed by surprisingly good retail sales data, which showed a rise of 1.1% versus estimates of a 0.5% increase.
Although there is a growing number of analysts warning about a long overdue correction, for now the markets are still enjoying this uptrend.
Will the S&P 500
reach its own all-time high before we see a major sell off?
In London, it seems that the US strength is rubbing off on the FTSE, with the index moving back above the 6500 level.
This is far stronger than we had previously expected, as we were calling the stock market index to open flat at 6480, but we are seeing a few sellers once again.
Clients seem to feel that we could see further resistance around this 6500 area, however, judging by the way the index has recovered, the momentum looks to be remaining firmly with the bulls.
Also see today's feature Investors Brush Eurozone Crisis Aside
Stock Markets: 13 March 2013
There's been an absence of major economic data releases
or geopolitical events this week and so you will often see equity markets drift in the direction of the trend.
However, the bulls are taking a breather this morning, with the FTSE 100 retreating from the 6500 level on the open moving down by some 30 points to 6480.
Those spread trading account holders that have been heavily selling the index will be glad to see this morning's weakness. However, the larger question is whether this is the beginning of a more prolonged correction to the downside.
We've asked ourselves this question each and every time there's been a sell off so far this year and yet there has been no major move lower.
Of course, the main reason is that CFD
investors remain content that central banks are acting as a backstop for the world's major economies by continuing to flood the system with fresh cash.
As long as the unemployment rate in the US remains above 6.5% and the rate of inflation in Japan remains below 2% those central banks are going to keep the money printing presses firmly on.
We saw US stocks demonstrate this sentiment once again last night as the Dow eked out a gain of a couple of points to end up at 14,450.
As long as the Fed's accommodative monetary policy remains in place, it seems that US investors are confident enough to push the Dow Jones higher, marking its eighth straight gain and touching a new record high at 14,478.
The FTSE 100 has already made double digit percentage gains so far this year and the index is just over 6% away from its all-time high.
As a result, there's naturally going to be some profit taking but the overall uptrend looks to remain intact from a technical analysis point of view.
To test this, the index
has to break back below support seen at 6400, 6250 and possibly even 6000, but for now the 6000s look like they are here to stay.
Stock Markets: 12 March 2013
The mansion tax debate has had some cold water poured on it by the junior coalition partners.
It seems that the Liberal Democrats will not back opposition plans to whack a levy on homes with a value of over £2 million.
Despite having their own plans for such a tax, they have clearly decided not to further facture the frail government by siding with a Labour move that is clearly designed by to amplify the divisions.
Whilst such an ill-thought out tax may seem attractive as a wealth tax on rich bankers, it really is nothing more than a bid to curry political favour with the electorate.
In practice, it would be one of the least effective ways to extract tax from the UK's wealthiest individuals.
The blanket rule would also have the potential to punish people who may live in an expensive home, but have very little cash or actual income.
At the same time, there may be others who are worth tens of millions but would not have to pay the tax at all because they own multiple properties under £2 million.
If higher taxes are to be imposed then there are far better ways to do it.
Back onto the markets, and this week has been a quiet one to say the least, with yesterday's US session being largely void of any major economic data releases.
As a result, equities
continued to look for direction from Friday's better-than-expected employment report and slowly drifted higher.
The Dow Jones reached a fresh all-time high, closing a further 50 points higher at 14,447, amid a sudden rally towards the close.
Nonetheless, the voices that point towards dwindling volumes should invite caution going forward.
For the UK spread trading
markets, despite the FTSE 100 initially slipping below 6500 this morning, the index has already managed to bounce back above it.
Given that we haven't been this level since 2007, it's yet another landmark in the recent rally.
Since the wobble over the Italian elections, most equity markets, including the FTSE, have gone from strength to strength.
Nevertheless, clients have really started to sell quite aggressively and have built up a substantial short position in the FTSE 100 and some of the US indices.
Whilst they clearly expect the rally to eventually run out of steam, the problem is that every retracement we've seen so far this year has been very short lived.
Stock Markets: 11 March 2013
Last Friday's Non-Farm Payrolls
figures took us all by surprise, with a figure of over 200k that smashed estimates for an advance of 162k.
At the same time, the jobless rate saw a completely unexpected decline to 7.7% amid a sharp recovery for the construction sector.
The news boosted some already bullish sentiment, pushing the Dow Jones another 67 points higher to 14,397.
Nevertheless, at the time of writing, the Dow futures are pointing to a lower start as we are currently calling the index to open lower by 30 points to 14,367.
Investors should also bear in mind that the US will open an hour earlier than usual as their clocks changed at the weekend.
This morning, European indices are taking the Italian credit rating downgrade in their stride, with the FTSE 100 initially slipping lower but now trading flat at 6483, although the banks are weighing a little.
Our spreads account holders remain rather short of the UK index
and so, in the absence of any economic data, we could see a fairly flat session until US markets open this afternoon.
Also see today's feature Investors Still Concerned by Italy