Crude Oil Spread Betting Market Drops as Economic Recovery Falters
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For today's update see Spread Betting Daily.
The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 15 August 2011: 12.00am Update
European stock markets rose in early trading today, extending gains into a third straight session, as a smaller-than-expected decline in Japan’s second-quarter GDP estimate provided a boost to risk appetite this morning.
However, comments from the World Bank over the weekend suggest that the current optimistic turn in the market is likely to be temporary until leaders draw up a long-term sustainable plan to propel the global economy.
The FTSE 100 was trading 0.4% higher this morning at 5340.14, while the broader FTSE 250 was up by 0.6% to 10,492.94.
Japan’s economy contracts
Data showing that Japan's economy shrank by less than expected in the second quarter following the earthquake and tsunami in March sparked a rally in Asian shares, which in turn helped provide a boost to European equity markets this morning.
Japan’s GDP contracted at an annualised pace of 1.3% in the second quarter, marking it a third quarterly decline, compared with expectations for a 2.5% contraction.
The data also helped strengthen the yen to ¥77.09 against the US dollar, above its 4 August level of ¥76.3 when the Japanese authorities intervened in order to stem further gains in the currency. Finance minister Yoshihiko Noda said he will continue to closely watch the financial spread betting markets and take bold action if it becomes necessary.
World Bank voices their opinion
Last night, the head of the World Bank, Robert Zoellick, spoke up and expressed his concerns over the current market turmoil. Mr Zoellick expressed his apprehension over markets losing confidence with the economic leadership in key countries and said that ‘we are entering a new danger zone’.
He believes that leaders are not reacting fast enough to the sovereign debt problems. Despite global stock markets showing a boost over the past three days, Mr Zoellick’s comments suggest that markets are likely to remain vulnerable to further declines.
Eurozone debt update
Over the weekend, Italy’s economic and finance minister Giulio Tremonti called for a more coordinated response to the Eurozone debt crisis, including the creation of euro bonds, against an immediate rejection of the idea from Germany.
German finance minister Wolfgang Schäuble said that euro bonds would undermine the basis for the single currency by weakening fiscal discipline among member states.
Tomorrow, markets will turn their attention towards the emergency meeting between German chancellor Angela Merkel and French president Nicolas Sarkozy.
Both leaders will look for ways to stem sovereign debt concerns, since the bond-buying programme and the temporary ban on short-selling of financial stocks are unlikely to provide a long-term solution for the deteriorating European debt problem.
Commodity prices expected to fall
The momentum of the global economic recovery is running out of steam and analysts believe that the demand for industrial commodities such as copper, aluminium and zinc in the remainder of this year will decline. September copper futures saw a 5.5% decline last week and light-sweet crude oil for September delivery fell almost 4% over the same period.
Consumer confidence has also shown a downturn, with the confidence among US consumers plunging to the lowest level since 1980 this month.
US pre-market
US September futures were higher this morning, pointing to a positive open on Wall Street this afternoon.
Today will see the release of the NY Empire State manufacturing index for August at 1.30pm (London time), followed by the TIC flow data at 2pm (London time). Among other US data releases this week, investors will look at the July industrial output numbers on Tuesday, July producer prices data on Wednesday and July consumer prices on Thursday.
Following Friday’s positive retail sales data from the US, investors are hoping that reports this week may calm markets by showing that the recovery remains intact.
Remember that financial spread betting is a leveraged product and can result in losses that exceed your initial deposit. Spread betting may not be suitable for everyone, so please ensure that you fully understand the risks involved.
The above comments do not constitute investment advice and neither IG Index nor SpreadBets.org.uk accept any responsibility for any use that may be made of them.
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"Crude Oil Spread Betting Market Drops as Economic Recovery Falters" last update by AG, 15-Aug-2011
Warning: Financial spread betting carries a high level of risk. You can lose more than your initial investment or stake. Financial spread betting may not be suitable for all investors. Only trade with money that you can afford to lose. Make sure you fully understand the risk involved. If necessary, seek independent financial advice.
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