Financial Gossip

We’ve tip-toed sideways again today with the FTSE 100 once again flirting with the 6000 level but being unable to close above it. This month is still currently the best December for the FTSE 100 on record, with the monthly gain standing at some 8%. The strong performance is a testament to equities that have been a good bet for investors in 2010 and look to remain so for 2011.

It’s understandable that with only half a day’s trading left for the year ahead of another extended week end to celebrate the New Year, some traders are banking profits and driving the market a little lower. It has taken the shine off what has been a good end to a remarkable year for the markets.

Today the only bright sparks were once again miners who benefited from yet another rally in copper prices. This sector really has been the recovery story for the FTSE 100 both in 2009 and 2010 following the rout it suffered in 2008. It’s conceivable that some mining stocks could test their all time highs from 2008 next year, especially if emerging economies continue to grow robustly.

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In an understandably quiet half day session the excitement of hitting 6000 yesterday has fizzled out as investors have banked profits ahead of the Christmas holiday and extended week end. The profit taking was broad based with some two thirds of stocks falling, but overall the loss was a small one. Despite the day before Christmas historically being a trading day that sees gains in the FTSE, today’s decline comes as little surprise considering the rally we’ve seen so far this month. You certainly can’t grumble if you’re a bull with December seeing the FTSE 100 rise over 8% so far.

Happy Christmas!

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Bulls have quite literally been saved by the bell as just before the close of the markets, in fact in the final minute of the session, the FTSE 100 traded through the 6000 level. Just when it looked like what was an incredibly boring session that couldn’t get any more boring, in the final fifteen minutes the bulls dragged the index over the finish line. The auction however meant we settled to close just below, but it’s a significant move nonetheless. Overall though the gains were slight and indicate that many investors have gone home early for Christmas. Few are willing to commit to equities at this stage ahead of the holiday break and volumes have been pitifully low this week with today being no exception.

There’s little else one can comment on the markets as trading ranges were incredibly narrow. The FTSE 100 has ranged a total of just 18 points today! The only highlights were strength from BP and Shell on the back of higher crude prices and the retailer sector in the hope that the Christmas sales will attract shoppers in their masses after finding it difficult to get to the high street recently due to the dire weather.

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The small revision lower to UK GDP numbers shouldn’t cause too much of a concern. GDP throughout 2010 has surprised to the upside so there’s plenty to be happy about on that front, but the real test will be when the tax rises and spending cuts take hold next year.
The rate of inflation in the UK remains underestimated by many and yesterday’s Bank of England minutes revealed that the MPC is starting to really acknowledge the risks to the upside. They now expect CPI to hit 4% next year which isn’t far off reaching the realms of Chinese type price rises. As the VAT hike comes in and rise in fuel duty, plus on top of this commodity prices are not going down, the pressure on prices is now becoming a real concern.
With interest rates remaining at historically low levels wealth and real income is slowly but surely being eroded away. Wage demands will only compound the rise in prices as workers ask for higher salaries to offset inflation. It comes as no surprise that the MPC’s tone is turning more hawkish and the base rate could start to rise soon. Whilst the CBI’s forecast for interest rates to be at 2% by the end of 2011 is probably too hawkish, they may not be far off that.
The FTSE is just shy of 6000, but our quote did touch there just before the open. There’s a little bit of profit taking in miners and banks and the slightly more defensive stocks are higher. The Christmas rally has seen the FTSE 100 put on more than 8% and the FTSE 250 has been even more exuberant nearly gaining 9%. The FTSE 100’s all time highs around the 6900 level may seem a long way off with the index needing to gain another 15% in order to reach there, but for the FTSE 250 things aren’t so far away with the record highs being a mere 6% off.
Currency markets a bit flat this morning but favouring the dollar but the euro continues to just about hold the dollar at bay. EUR/USD is at 1.3100 this morning after seeing a sharp retracement from 1.3150 already. Short term support is at 1.3070 then slightly more significant is 1.3000.
Cable marked new 3 month lows yesterday and the bears have their claws out again. Trading at 1.5380 this just above a major support area around 1.5340 where the cross bounced from back in September. This is also on the 200 day moving average so support should be provided, but this little bit of risk aversion is as a result of the mild equity market weakness.
USD/JPY is testing the 83.00 level which coincides with the 50 day moving average. 82.85 then 82.60 and 82.30 are intraday support levels to watch and to the upside the pair has to head back above 83.30 to negate this little bout of weakness.
Gold has been struggling below 1400 for over a week now. The recent rally in bond yields is being interpreted as bullish for the economy, inflation and therefore interest rates. This is generally bad for the precious metal and if this sentiment continues 1400 will continue to be a difficult barrier to overcome. 1380 and 1375 are short term support with a more major level at 1363 which both bulls and bears will be keeping a close eye on.

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While London markets remained closed on Monday and Tuesday, the last couple of days have provided mixed moves, with risk aversion assets benefiting from low volumes and indications that few investors are willing to expose themselves too much as the year draws to an end. Yesterday in particular gold and the Swiss Franc soared but unusually US treasuries fell sharply.
This morning, however, the FTSE is showing just enough strength to remain above the 6000. During Monday and Tuesday we had been quoting the FTSE 100 as much as 50 points lower as other global indices dipped, but having been felt left out in the last couple of days the market has sustained its ground following the surprise move above 6000 at the death on Christmas Eve.
On an individual stock basis it’s a mixed bag this morning with some strength coming from defensive sectors and the riskier stocks just drifting into the red. With only a couple of trading sessions left for 2010 its no wonder volumes are so low and we can expect this to continue until traders return to their desks in earnest next month.
This year has seen healthy gains for equity markets, so we can expect to see narrow trading ranges continue with a bias to the upside since that’s the direction of the trend so far this month.
While the equity markets that have been open have been very quiet, the same cannot be said for gold. Ever since Christmas the precious metal hasn’t looked back rising aggressively back above 1400. At 1407 this morning we are around the most recent high just before the holiday break so resistance can be expected but a break above here might see a return to the 1420-30 area and the all time highs.
EUR/USD followed gold in its footsteps on Monday almost reaching 1.3300 however it gave back much of its gains yesterday. This morning we’re at 1.3140 with 1.3060 the near term support and bears still waiting for the major support at 1.3000 to give up the ghost, hoping for a move to the downside where they’ll have 1.2900 in their sights. To the upside over the near term 1.3170 and then 1.3270 are targets for the bulls.
For EUR/CHF the bullish engulfing formed just before Christmas has not been followed through as yesterday’s sharp reversal back below 1.2500, caused by the spike in gold and risk aversion of the past few days, means the downward trend for this pair is unlikely to be over. At the time of writing we’re at 1.2515 with the recent low of 1.2450 being crucial.

This article was written on behalf of Capital Spreads. Please click here for more information on Spread betting or Trading Platforms.

As 2010 draws to a close we look back on a year where we managed to avert disaster on many fronts. For all the bailouts, oil spills and quantitative easing, equity markets managed a continuation of 2009’s bull market, albeit nervously! So looking into our crystal ball we attempt to foresee whether the good run for equities will continue into 2011. On the valuation front there are still many stocks in the UK that look attractive and having been through a couple of years of eliminating overheads wherever they can, many are looking to invest, some via takeovers, but also some firms are upping their dividends.

The FTSE 100 and 250 indices are yielding in between some 2% and 3% which may not seem much, but if you pick your stocks correctly you can be looking at 5%+. This continues to give a far better return than many other asset classes, which is why many people are predicting a double digit return for UK indices in 2011, especially if you factor in dividends too.

Trading over the last few days has seen low volumes and narrow trading ranges as traders remain away from their desks and are not expected to fully return until the New Year. For those markets that have been open, the last few days have definitely had a whiff of profit taking about them, even if US indices have been creeping higher bit by bit.

This morning the FTSE is just on the side of the angels at 5990 having already had a look at 6000, trading above it very early on but retracing immediately. Resistance is seen around 6030 and 6050, but judging by the way the index has been moving recently we may not get there before the year is out.

The fact that gold has bounced strongly is making a few investors nervous that the New Year might bring problems, in particular for the eurozone. This however is playing into the hands of the mining sector that’s seen good strength in the last few sessions.

But gold’s strength has played into the hands of the riskier currencies as the US dollar retreated. EUR/USD made a bit of ground as the pair continues to track sideways. The latter part of this month has seen EUR/USD be incredibly dull, but ideal for short term traders dipping in and out of the markets. Thin volumes once again allowed us to touch 1.3200 yesterday and this morning we’re slightly stronger still at 1.3230. Resistance is seen at 1.3275 in the short term but for the bulls over the longer term the rate has a lot further to go before it can persuade them this downtrend that commenced in November is over. To the downside there’s 1.3080 and then the crucial 1.3000.

Cable also enjoyed some strength as it tries to make ground back above 1.5500. At 1.5506 this morning, levels to watch are 1.5535 to the upside, where we’ve already tested this morning and 1.5355 and 1.5315 to the downside.

As already mentioned gold has been a beneficiary of risk aversion and a decline in the dollar. Yesterday’s break above 1409 is bringing us one step closer to the all time highs. With the precious metal currently at 1414 bulls will target 1420 and 1425 and hoping that support around 1395, then 1388 will hold out.

Crude did not benefit in the usual way from dollar weakness. It too is struggling at its highs, failing to push on beyond $91, but the mere fact it’s above here is technically quite significant at least for the longer term. Short term the weakness from yesterday has kept a cap on today’s gains so far as the black stuff matches gold’s strength and we’re at 91.30. Support is around 90.75 and 90.35 meanwhile resistance is seen at 91.88 and then 92.20.

This article was written on behalf of Capital Spreads. Please click here for more information on Spread betting or Trading Platforms.

So Christmas Eve is upon us and for the markets this morning things seem to be crisp and even. The FTSE is being called flat to just higher as the half day trading session gets underway. Yesterday we breached the 6000 level right at the death of the session and so the question is whether we can close above this level before the holidays.
The December rally until now has been fuelled by the prospect of the US and other major Western economies continuing to grow even if assistance from central governments is being phased out. Sentiment for equities is certainly bullish, even if our clients continue to sell into the strength. In the past few weeks interest rate expectations have suddenly started to head higher. The threat from inflation is real but the FOMC is still consumed with the idea of preventing deflation. The recent move in US bonds might cause them to rethink that position.
There’s no doubt that investors have not glossed over the eurozone crisis and if there is any rally that follows, the market will not go up in a straight line. They rarely do of course!
The euro put on some gains yesterday and looked to have stopped the rot against the Swissy. The Swiss franc has gained a whopping 15 % against the euro and 3.5% in December alone. Every bit of euro strength in 2010 has been swiftly batted away by investors, but yesterday’s move formed a bullish engulfing candlestick bouncing off the 1.2500 level, back above 1.2600. This morning EUR/CHF is at 1.2610, support is at the recent low around 1.2435 and if we get below there bears will be targeting 1.2380. The bullish engulfing needs confirmation before we can say that there a change in the trend for this cross over the short term, so resistance is at 1.2635 and then 1.2715.
Against the dollar the euro didn’t see quite as much strength, but it certainly saw a decent bit of volatility towards the end of the session rallying from its lows around 1.3050 to 1.3140 before settling back around 1.3100. This morning EUR/USD is at 1.3130 and despite all the negative sentiment and news flow coming out of the eurozone, the currency remains determined to hold the ground above 1.3000.
Costs for insuring Greek government debt rose yesterday so the pressure on the euro remains. Next year will be a continual struggle for the single currency as investors deal with ever increasing likelihoods of more sovereign bailouts.
The dollar continues to struggle against the yen and Aussie. USD/JPY dropped almost one percent and is at 82.95 now, sitting on its 50 day moving average where there might be some support. AUD/USD moved back above parity and is at 1.0040 this morning.
Despite the overall weakness in the dollar this hasn’t managed to translate into the usual strength in gold. The precious metal drifted 6 bucks to the downside yesterday and is at 1379 at the moment.
All that leaves for me to say is that I hope you all have an enjoyable Christmas!

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The media leaks of recent have been hitting the headlines and now our “business” secretary’s head is on the block. His comments have been slightly blown out of proportion and after all a lot of what he said was purely his view. The danger here is that politicians will just be more secretive in future, but maybe that’s a good thing!

On the markets the US session ground higher but European indices are being called to open flat this morning. The FTSE’s breakout above 5900 is a significant move higher and we’re just that one step closer to the magic 6000 level. December usually always attracts the bulls and this one seems to be no exception. The gains continue to be led by the resource stocks and even banks joined the party yesterday.

Clients continue to oppose the trend expecting the rally to fizzle out and this has mostly been their view throughout December and a brave one at that. The grind higher doesn’t look like stopping, but for now at least investors are content to reflect on yesterday’s good move higher.

The euro has been remarkably resilient and has even been getting the edge on sterling over the last few days. Certainly for GBP/EUR a double top formed around the 1.2000 area and since then the cross has retraced nearly 2%, failing to retest the area. This morning GBP/EUR is at 1.1782. Major support is at 1.1700 and near term resistance around 1.1830.

For EUR/USD there was strength early on and then gains were wiped out after Moody’s threat to downgrade Portugal’s credit rating. At the time of writing we’re at 1.3130 so near term support is 1.3100 then 1.3060 and 1.3000 and it’s the support areas that look the most likely candidates to be tested as opposed to resistance which is seen at 1.3200, then 1.3265 and 1.3300.

Cable has had a mini break to the downside going below 1.5500 marking a 3 month low. At 1.5470 this morning it’s testing its 200 day moving average now so there might be some support around here and 1.5400. A break below there might open up 1.5250.

For all the developed economy currencies there are considerable structural concerns. The US has just announced another bout of QE, the UK is about to threaten its growth with higher taxes and government spending cuts and the EU (at least the periphery) is in financial meltdown. On top of this all have massive budget deficits that don’t make the currencies hugely attractive from an investor’s point of view. It’s no wonder that as a result of these problems in 2010, when compared against a basket of other currencies, the dollar is down 1%, sterling is 5% lower and the euro is down 10%.

Next year in the FX markets it’ll be a question of picking the best of a bad bunch if you’re looking to trade the majors and certainly the euro will struggle to claim the crown.

Gold traders seem to have gone home early for Christmas and this morning we’re at 1389. The little bounce off the 50 day moving average means the momentum is still just about with the bulls and we’re still a long way off from saying that is upward trend is over. Over the short term support is at 1380 then 1376, with the major low at 1363 being a key support area. To the upside 1391 and then 1398 are hurdles before bulls can get excited about seeing the 1400s again.

Crude teetered below $90 all day yesterday and is just above there at 90.05 this morning. $90 remains the important level to close above if we’re to see another push higher and to the downside $87.75 is a major support level.

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The market looks to have well and truly thawed out of its frozen trading range today. After the sixth attempt in the past week the FTSE has squeezed the bears and we’ve popped above 5900 to close at the highest level for 2010. The December rally is continuing its rich vein of form with miners and banking stocks being the pick of the bunch.

Investors will be focusing on the year ahead and the outlook for equities remains strong despite the headwinds that the UK economy faces. The FTSE 100 is a global index with a large exposure to the world economy which will continue to grow in 2011 with emerging economies being the drivers. With an index that is so heavily weighted in mining and resource stocks it’s difficult not to want to be exposed to it. Half of global GDP is made up of growth from these emerging economies, so as long as they continue their insatiable appetite for raw materials, on the whole FTSE 100 constituents will benefit.

This article was written on behalf of London Capital Group. Please click here for more information on cfd spread betting or spread betting forex.

Despite no lasting resolution to the sovereign debt crisis and further threats of credit rating downgrades, the markets are reflecting on what’s been a good year for equities. In the absence of any major economic data releases today, as is often the case when volumes are starting to drop off, the FTSE is following its upward trend and the grind higher continues.

As we wind down for the Christmas holidays investors are content to just shuffle their portfolios around without committing heavily at this late stage in the year and focus on what might lie ahead for 2011. Even though sentiment may suggest otherwise, the outlook for equities next year remains positive.

Today’s small gain however was tarnished slightly by the FTSE’s inability to close above resistance levels once again. Just when it looked like we were set to close at a new high for the year, the US markets opened weaker and dragged London from its morning peak.

This article was written on behalf of London Capital Group. Please click here for more information on cfd spread betting or spread betting forex.