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.

Finally!  We have a new Prime Minister and whilst David Cameron may not have won an outright majority, the outcome of the election was clear that the country did not want a Labour government or Labour coalition despite Gordon Brown’s best efforts to form one.  In unchartered waters now the new coalition government will not have an easy ride, but at least the rhetoric so far is encouraging with both teams waving the new Blue and Yellow flag to stabilise the economy and deal with the UK deficit.  The next landmark in the political calendar is the emergency budget in fifty days when our new Chancellor will announce the finer details of deficit reduction and tax increases or maybe even the odd cut here or there.

The FTSE is a little weaker in early trade after the dip towards the end of the US session last night although we were calling the market a little lower overnight.  The markets look to have stabilised a little for now and many investors are just biding their time before diving back in too fast as the sovereign debt situation throughout Europe still looks incredibly unstable.

There’s plenty of economic data out today with UK unemployment numbers at 9.30, which should show that the private sector is starting to hire again, although at a vey slow pace.  After that the quarterly inflation report is released at 10.30 which will highlight concern over the increasing rate of inflation, but it unlikely to show a big change in inflation expectations that should continue to point to a decline later in the year.

Cable had a see-saw day as the market tried to get to grips with whether the Lib Dem leader was going to get into bed with Labour or the Tories and as things gradually emerged that a Tory/Lib-Dem tie up was most likely the short covering allowed sterling to head back towards 1.5000 against the dollar and 1.1800 against the euro.  But after Gordon Brown’s surprise resignation gains were reversed and we’re back around 1.4900 this morning.

The euro remains the dog is all this after its relief rally back up to 1.3000 it didn’t take long for the bears to bring us sharply back down again and so this morning we’re at 1.2650.  Despite the massive bailout it doesn’t really change the fact that the PIIGS are struggling and the euro is overvalued.  Now that the 1.3000 level has been smashed, the medium term bears will be looking for a run at the 1.2500 next and below there 1.2300.

Questions are also hanging over the Aussie dollar as it has failed to gain traction above and beyond the 0.9300 area and there are fears that the RBA is near the end of its interest rate hiking cycle.  Quite a few long positions have been unwound and bears will be looking for a test of the February lows around 0.8600, in particular if further equity market weakness sets in.

The recent volatility of the fast few weeks have served to benefit the price of gold which so nearly marked a new record high yesterday.  Buyers are few and far between at these levels, but a break above here 1226 will have the bulls aiming for 1234, then 1240 and over the longer term 1278.  Looking at the longer term chart the bull run for gold still looks healthy, but the higher it gets, the more prone it will become to sharp corrections to the downside.  Buying at these levels now requires quite deep pockets, certainly if you want to buy the physical!

After yesterday’s mild decline for crude prices this morning Nymex is at 75.80 as it continues to hover just above $75.  Oil seems to have detached itself from movements in gold and the fears of the effect that sovereign debt problems will have on the wider global economy is taking its toil.

Spread betting, also called spread trading is a method of speculating on the world’s currency exchanges in order to make a profit. On the foreign exchange, you bet on spreads without actually owning the currencies. Spread betting is, as its name suggests, a form of gambling although your odds can improve with experience. You bet on the movements of pairs of currencies (i.e. the spreads).

Spread betting isn’t unique to the foreign exchange – in fact, financial betting is fairly new. Spreads are found everywhere – greyhound racing, football, the stock exchange… anywhere that bets can be placed. The joy of spread betting on the foreign exchange is that you don’t own the currencies involved, you just bet on their movements. Unlike other forms of trading you don’t need vast amounts of capital.

There are various types of orders that you can use in spread betting. The most traditional, and still widely used, is an order ticket. As the name suggests, the user fills in an online order ticket that includes price, bet size, “stop” requirements and order type. This can be combined with level 2 trading, in which you place bets on currency movements happening at that very moment, i.e. in real time.

Single click spread betting uses powerful software that allows you to perform complex strategies with single actions, using charts or specialist tools. To capitalize on spreads successfully, it’s essential you understand the terminology of market orders, which is why you need a good spread betting specialist who will explain the concepts in an easy-to-understand way.

Spread betting allows you to dip your toe into the heady waters of financial trading, without getting your feet too wet. Basically it’s a form of financial gambling (spread bets can be placed on anything, including horse racing and the stock exchange). With financial spreads, bets are placed on the movement of currency pairs on the foreign exchange, either at a point in the future or at point of trade.

There are various forms of spread betting, some more complex than others, but they basically mirror normal forex trading. The difference is, you place a stake rather than purchase the actually currencies involved, so there is no heavy outlay.

Briefly, you as the trader speculate on the direction of one or more currency movements, relative to each other; for example GB Pound versus US Dollar, or US Dollar against the Euro. You specify the amount you want to bet on each point movement. Profits and losses are made by calculating the difference between the opening and closing prices, multiplied by your stake value.

There are certain rules in spread betting, though. Unlike the bookies, you can’t just go in and bet 50p on the outcome of the Japanese Yen and the US dollar in the 3.30. Financial spreads are margined, meaning you deposit a percentage – typically 10% – of the overall value of the trade so you still have an initial financial outlay. However, this is far less than you would pay by buying the full value of the spreads, giving you a much larger position overall.