Posted on | June 8, 2012 | No Comments
The FTSE 100 spread betting index traded at 5395, down 0.96% at midday in London, while US futures were down as the stimulus-fuelled rally comes to an end, at least for the time being.
This comes as optimism over China’s surprise rate cut quickly turned to fears over its growth and the downgrade of Europe’s fourth largest economy, Spain, by ratings company Fitch failed to ease concerns over the Eurozone’s health.
Also aggravating the situation was the lack of an explicit commitment to more QE in the US.
In his Congressional testimony yesterday, Fed chairman Ben Bernanke failed to hint at looser monetary policy in the US. Instead, he opted to press for more active fiscal policy from the US government and a resolution to the interminable problem of the burgeoning US deficit.
The important thing to take away from his speech yesterday appears to be that the Fed thinks it is reaching the limits of what an active monetary policy can achieve, and that a third bout of easing would be far less effective than the previous two iterations.
Banks and miners were both down as a result of a speech which led to a resurgence of the bears.
Banks were led lower by Barclays and Royal Bank of Scotland, which were down almost 3% and 2% respectively at midday.
Miners Vedanta Resources and Rio Tinto shares spread betting were down 5.5% and 4.8% respectively following the Chinese rate cut, as worries about weak upcoming data releases from China took precedent.
The Spanish situation continues to deteriorate, especially with the downgrade by Fitch last night. A conference call between the 17 members of the Eurozone will be held on Saturday to discuss the bailout for Spain.
Across the Atlantic, US wholesale inventories data are released at 3pm (London time) and expected to increase to 0.4% in April from 0.3% in March. US trade balance data will be released at 1.30pm (London time).
By Chris Beauchamp, Market Analyst, IG Index.
Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.
IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.