Financial Gossip

There seems to be a certain amount of nervousness around at the moment with equity markets holding their recent ranges (the FTSE to the middle/top and the US/Dax to the middle/bottom) and Gold pushing for the upside. In times of concern Gold has frequently been a canary in the coal mine (although not always) warning of imminent but unquantifiable fears around the corner.

The last four weeks have seen something of a hiatus for the Equity markets with tight ranges dominating and the odd day or two day break out giving us some interest. The drop in the middle of last week came out of the blue and, worryingly for many of the global indices, there has been no significant rebound (the FTSE being the notable exception). As mentioned a week or so ago the summer months have been notable for the sudden cessation of news stories about the sovereign fiscal problems of much of Europe but this is likely to change as the political classes of Central Europe return from their extended holidays. Just because the headlines have gone from the front pages does not mean that the problems have been solved with a €750bln support package. Not only this but inflation, continually disregarded by the various central banks in their drive to resuscitate growth, now appears to be raising its ugly head as it proves to be much stickier than hoped in the UK and is now at a near two year high in Europe.

Not that the Bond markets seem to have noticed as the Bund and Gilts hit an all time high yesterday. This is because Base rates are likely to remain very low for quite some time as central banks continue to attempt to stimulate economies through the tried (and one would have thought ‘busted’) route of cheap money and so long dated yields have finally followed them down. With China and the cheap manufacturing bases now experiencing some considerable inflationary pressures it is difficult to see where any external disinflationary impulses are going to come from. We may find that the ‘new’ era of cheap money runs full tilt into something of an inflationary spiral.

The FTSE is looking to open at the top of the range (again) as investors look for a break above 5305/15 once more. One wonders how many times we can have a go at the same level without success. As with the 5415/25 resistance in Late July/Early August we seem continually of the verge of breaking higher but never quite manage it. Clients are selling at the highs in pre-market trading (unsurprisingly) hoping for a repeat of the last three sessions. This is a dangerous game to play in too big size but on past performance is a natural reaction. There may be an attempt on the open to push us higher and take out some weak shorts but if we have failed to make headway by the US open then sentiment may begin to turn against the bulls.

As mentioned yesterday resistance is at 5305/15 and 5355/65 and support at 5225/35 and 5170/75. Oddly enough the tight support/resistance levels of pretty much exactly defined yesterday’s range and so it is not a massive leap of faith for day traders to try the same today.

Currency markets are quite stuck as well with the Euro meandering about in the mid 1.28’s and Cable holding its own around 1.5650. Yen seems stuck in the 85’s and it is slightly worrying that the dollar, which has rebounded versus the Euro and Pound, is still wedded to the lows against the Yen. The attempt to bounce late last week has been reversed and (while the Yen looks heavily over valued already) the momentum seems to be showing the way to even higher ground. Very strong support for the USD/YEN is at 84.90/85.20 which is holding for the time being but longs should be wary of a break lower.

As mentioned Gold is grinding ever higher and is now at 1225 pretty much its high for a month or so. There is some resistance at 1225/1227 from the previous support level in June and this may well hold us back for the time being. A break above here though might give the bulls just the reason they need for a push to the highs. On the other hand (of course) pull backs are meat and drink these days and so shorts on our book are finally building as our clients start to come out of long term longs.

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

Friday’s Non Farm Payroll figures showed that companies in the US employed more people than forecast in August, spurring US stocks to climb, with the Dow completing the end of week session at 10447, up 127 points on the day. This rally further increased confidence on this side of the pond pushing European indices higher, with FTSE 100 index closing up 57 points at 5428, having traded at 5109, just 10 days earlier.

Trading volumes have been relatively low this August; however since September arrived, interest and particularly buying activity has been prominent amongst ProSpreads’ high net worth client base.

This weekend’s news of BP’s woes hopefully coming to an end is also likely to kick start more buying next week with significant gains in global equity markets likely in the first half of the month.

The rallying equity markets last week also precipitated in lower treasury prices, a move welcomed by many of the professional traders at ProSpreads, who have been accumulating short positions in treasuries for some time now.

This article is written on behalf of Prospread. Please see for more information on Professional Spread Betting and Meta Trader 4.

When people first look at spread betting, the whole concept can appear confusing – especially with all the jargon – yet the overall concept is actually quite simple and the ‘financial spread’ is not too different to traditional share purchasing.

If you wanted to look at traditional shares, a stockbroker would quote two prices. The lowest price is what you would get if you were to sell the shares – the ‘bid price’. The higher price given is what you will pay when you purchase shares and is known as the ‘offer price’. The difference is called the ‘financial spread’.
With spread betting, you also have two prices quoted to you and they are also called bid and offer prices.
The difference with spread betting is you never actually purchase the shares you wish to trade on. Plus of course, you can spread bet on almost anything, not just shares.
If you think that the share, index, market or anything else you are spread betting on is going to increase, then you ‘buy’ at the offer price (the higher one). If you think it will decrease, then your spread bet starts at the bid price (the lower one).
To make your profit, you must cover the cost of this financial spread so if you place a ‘buy’ spread bet then you are not going to make a profit unless the price rises higher than the price you ‘bought’ at, in other words your spread bet must cover the financial spreads to make you a profit.

Most people who are serious about making money through spread betting will soon wise up to the fact that you need to get to know your market in-depth if you are to avoid simply ‘gambling’ your money. Spread betting is also known as spread trading, and to make serious money in this way you need to be a trader and not just ‘bet’ your money away.
You can bet on the spreads for almost anything these days, from currencies and foreign exchanges to individual shares and indices or almost any market that can be measured.
A responsible spread betting company will advise you that spread betting, like any form of investment, can increase or decrease. Any advantage you can take, and in this case knowledge, will help minimise your risk.
There are many economic factors that can affect the main markets for spread betting, such as the price of currency and for your market, you need to learn what these are. In most cases, these economic factors are reports or data releases that have some form of predictive value. Investors based their decisions on these things, so if you are spread trading shares you might see the value of such shares increase or decrease rapidly before or afterwards and this information can make you a lot of money if you can anticipate the movements.
A few examples of such economic data include information on a country’s Gross Domestic Product (GDP), price indices such as the Consumer Price Index (CPI) or Producer Price Index (PPI) or interest rate changes.

So the FTSE markets opened 160 lower and immediately added 100 points to rally to just 60 off in the first quarter of an hour.

The air of nervousness is palpable in all the markets after the chaos of yesterday evening when some programme trading in the US caused mayhem. The Nasdaq (on which many of the trades took place) has announced that any trades which were greater than 60pc ! off on an individual stock have been reversed but that all other trades stand. As an example of what happened Accenture fell from $41.00 to a traded low of 10 cents (!) a mind bogglingly stupid occurrence and one that can only happen when computers are allowed too much control.

Naturally rumours swirled through markets that something had happened to cause the sell off (a major European Bank failure was the favourite for a while) but ultimately the solution appears to be the unpalatable fact that the falling markets triggered a whole swathe of Black Box systems to start selling stock ‘at market’. There were not enough buyers around to sop up the surge in offers and the systems just continued to try to hit a bid (any bid). Whoever was running these programmes will be sitting on possibly Billions of dollars of losses as the market recovered just as quickly.

Just before Christmas last year I was asked my prediction for the FTSE’s level at the end of 2010. I gave the answer “5250” for the sole reason that it was trading at that level at the time of the question and I could not really see any reason for either a rally or a fall. A week ago with the FTSE pressuring 5800 I was resigned to being seriously wrong on my rather ‘tongue in cheek’ prediction but suddenly we are back under the number at 5210 and I am looking quite guru like.

At least the election is now over so we can get back to some sort of normality. Labour cannot form a government with just the Lib Dems and will need other parties to agree to a coalition. This rather damages the power of the Libs as they will probably now have to deal with the Tories if they want to get into power sharing and will be unable to trade one party off against the other. The harsh decisions that will have to be made over the next few years will have a huge number of dissenters in all the parties and I do not fancy the job of chief whip for the next parliament. A coalition of Tory/Lib Dems/ Ulster Unionists is probably the most stable pairing as it will not rely on all the Lib Dem members voting the way of its leadership.

We are in very dangerous waters in the markets in general with extreme volatility suddenly breaking out (May is always a bloody awful month). The FTSE does have major support at 4970/5000 although it did trade as low as 4830 or so last night but this can be discounted as a break as it relied on the mess in the US. While the sell of the last few days has been precipitous it is difficult to really get a handle on the real underlying causes. Corporate results have been much better than expected and, while the sovereign debt issue has been headlining, other issues should not impact the equity markets to quite the extent that has been the case. The reactions over the last few days merely emphasise the fact that not everyone was really convinced by the last 13 months of near one dimensional direction.

It is time for tin hats, deep pot holes and even deeper pockets as clients attempt to hold positions against the vagaries of the markets. Sitting on your hands in this type of activity is definitely the best policy.

On the currency markets there is a different worry. The Euro has now almost reached the longer term target for the Bears of around 1.2350/1.2450 (mentioned …..ooohhh ….way back last week when we were up at 1.3250) and the cross actually got as low as 1.2520 last night. It is difficult to get our heads around it but.. the Euro is still overvalued on a purchasing power parity view point although it is now marginal. Movements like this generally go too far so there is still a good possibility of even more pain for Euro longs.

The only winner in all the chaos was Gold as investors desperately searched for any port in a storm. The yellow metal reached as high as 1210 but this might now prove difficult to match as saner markets come back into focus. Dealers will be concerned that the rally was not more powerful as other asset classes went into meltdown and so longs may well start to take profits.

Simon 09.16

on the note of the last message miliband won his seat with 18k (total votes about 33k) next up was cameron winning with 33k votes (total votes over 53k)

one of the really irritating things about our elections is not just the first past the post issue but the fact that so many of the constituencies are of such varying size (even after decades of boundary changes).. many of the southern/rural constituencies seem to have 50 to 60 thousand votes (requiring at least 20-24 k to win) whereas many of the metropolitan constituencies seem to only need some 13 to 19 thousand to emerge top of the pile.

it does leave one wondering how these things are calculated

simon 02.51

thoughts of a decisive election are now virtually dead. I particularly enjoy the winning  speeches as the vast majority (from whatever party) are bile inducing attacks on the others. Nary a gracious tone in victory from any of them (as would be decorus) even if they did not mean it

The tight seats all seem to be falling in line with the incumbent member. Unless something very strange has happened the Lib Dems look to be acheiving a zero sum gain but  with the emphasis very much on the word ‘gain’. The vagaries of the electoral system have always deprived them of their fair share of seats but this time they may very well have the power to force electoral reform.

For Labour this would almost certainly mean a virtual permanent seat of power as the LD’s would need a dramatic change of focus to ever actually support the Tories.

Markets do not seem to know what to do but the important thing is that they are not collapsing under the failure of the Conservatives. A relief rally may be on the cards.

Simon 02.42

ftse futures now open and are indicating that the FTSE will open 155 points lower on the off in fact i cannot actually remember the index opening up a gap of this size from the previous sessions close. [a curious fact about 9/11 was that the FTSE actually traded higher over the next few days.]

the reasons for the fall out in the evening session in the USA are still not clear but the first day after an election is not a great one for a huge sell off.

Simon 01.24

sterling still moving higher as a hung parliament gains momentum

cable now above 1.49 having been down at 1.4740 a few hours ago. It would appear that there are just too many ‘short’ positions out there and there is just nobody left to sell it lower.

Simon 00.45