Spread Betting Daily
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The Daily Update from Anthony Grech, Research Analyst, IG Index.
Spread Betting 23 May 2012: 10.30am Update
The blue-chip index reversed gains made in the last two days on the back of uncertainty surrounding the EU summit in Brussels today, and by 9.40am (London time) it was down 1.7% at 5312.
Indices spread betting markets reacted to the possibility of a lack of resolution from the summit, as well as yet more generic rhetoric from EU leaders.
Yesterday German Chancellor Angela Merkel dismissed calls to issue common Eurobonds, clashing with French President Francois Hollande and ignoring the OECD and IMF, both of which had come down firmly in support of this idea.
Germany fears that common bonds will simply give its southern neighbours a licence to go on spending, something to which the German public is implacably opposed.
On the other hand, growth is now firmly ensconced in the agenda for discussion, which is a small victory for France and the southern Eurozone nations.
Also weighing on the UK index was the news that the World Bank cut its economic growth forecast for China this year to 8.2%. They urged the country to rely on easier fiscal policy that boosts consumption, rather than state investment to lift activity.
Trade data from Japan also didn’t help matters, showing a slowdown in export growth that suggests the global economy is entering yet another soft patch.
Vedanta Resources, which had fallen by 5.6% as of 9.30am, led UK miners lower.
Banks were also down, showing falls across the board as a result of Eurozone fears; Barclays led the pack with a drop of 4.2%.
Meanwhile the US dollar index continued to push out to 20-month highs, while yields of safe-haven bonds and Treasuries dropped yet again as investors took refuge in all the usual sanctuaries.
Bank of England minutes revealed that David Miles, a long-standing dove, voted to increase the size of the stimulus programme by £25 billion, while the other eight committee members opted to leave policy unchanged.
Retail sales for the month of April fell the most in two years, to 1.1% on a year-on-year basis from an increase of 3.3% previously, showing that the UK consumer continues to prefer saving to spending.
UK retailers were hard hit following the weak retail sales data, with Marks & Spencer, Debenhams, Next and Home Retail all losing ground.
On a technical basis, the UK 100 is fast approaching oversold levels based on the current 14-day RSI of 32, a level below 30 signifies oversold territory.
The next level of support seems to stand at 5210, not breached since December last year, while the blue-chip index faces strong resistance at the 5400 level.
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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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"Spread Betting Daily" last update by AG, 23-May-2012
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