FTSE 100 Spread Betting Market Rallies 50 Points on US Interest Rates Comment

Posted on | January 26, 2012 |

European stocks received a boost after the Federal Reserve struck an overly dovish tone last night and pledged to keep US interest rates at exceptionally low levels through to late 2014 at least, compared to a previous guidance of mid 2013.

The dovish tone and highly accommodative stance taken by the Fed, which hints at a potential for more quantitative easing, gave US stocks a boost in trading last night.

There has been a firm follow through to European trading today, with resource stocks benefiting in particular.

By 10am, the FTSE 100 spread betting market had rallied 50 points to trade at 5773, with similar gains seen for the French CAC and German DAX indices.

It is now important for the FTSE 100 to break above strong resistance at 5820 if its near-term bullish form is to continue and help it to target the 6000 level once again.

It’s been a ‘risk-on’ start to trading firmly on the back of the FOMC pledge to strongly support the US economy through to 2014, which surprised some.

The sceptic in me would question what the Fed has seen to warrant a more aggressive accommodative stance, particularly considering recent US economic data has highlighted an improvement in US activity.

For now however, we have seen a positive reaction from spread betting investors who have taken the Fed’s pledge in their stride and aided their appetite for risk.

From a sector perspective, as one might expect with an accommodative stance from the Fed, it is resource stocks benefiting the most in trading.

The FTSE 350 mining sector has rallied over 2% in early trading as a result, and it is here where we can locate much of the FTSE’s early strength.

Financial stocks have also seen positive buying, with bank shares such as Lloyds Banking Group rallying 3% in the ‘risk-on’ environment.

Stronger mining updates

Stronger company earnings and updates have also given stocks a fillip to push higher and counter much of yesterday’s weakness.

Shares in Kazakhmys led the FTSE’s charge after the Kazakh focused miner posted annual copper production that broadly met forecasts and eased shareholders minds by forecasting a similar rate of production for 2012. 2011 output of copper came out at 299,000 tonnes.

Anglo American also reported well received earnings, with a 10% rise in copper output in the last quarter of 2011 helping to see the miner recover from a poor third quarter’s production that was hit by poor weather conditions.

Lonmin also saw its shares spread betting market receive a lift too as it updated shareholders.

Later in the session, traders will switch their attention to the release of weekly US jobless claims and US housing data, which may influence how UK and EU stocks close.

Please remember that Spread Betting and CFD Trading are leveraged products that carry a high level of risk to your capital and can result in losses that could quickly exceed your initial outlay. These products may not be suitable for everyone, so please make sure you fully understand the risks involved.

Spread Betting and CFD comments by Joshua Raymond, Chief Market Strategist, City Index.

The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.

Neither City Index nor Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.

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