FTSE 100 Spread Betting Market Trades Lower in Response to Negative GDP Results

Posted on | January 25, 2012 | No Comments

The UK suffered its first contraction in GDP for a year in the last quarter of 2011, with GDP falling slightly more than expected, by 0.2% against most expectations for a fall of 0.1%.

The fall in GDP had been long expected given the headwinds facing the services sector and the breakdown of activity in the Eurozone, a large UK trading partner. As such, the contraction in Q4 was inevitable.

At the very least, the negative GDP reading will keep the pressure on both the Coalition government and the Bank of England to re-ignite the faltering UK economy through additional stimulus measures.

Though, with such a heavy reliance on Europe as a large UK trading partner, the UK’s economic fate lies in the hands of Brussels as much as London.

However, should today’s GDP reading escalate fears significantly of a marked period of negative quarterly UK GDP?

Perhaps not. The real concern for now remains the prospect of anaemic UK growth in the medium term than of a prolonged period of negative quarterly GDP.

More QE on the way appears likely

Today’s GDP data release from the Office of National Statistics, alongside minutes from the latest MPC meeting at the Bank of England strongly suggests that the UK’s Central Bank will now inject more firepower. More quantitative easing may be on its way to help the UK stave off a prolonged period of negative GDP..

There is every chance that next month, when the UK Central Bank will digest the latest quarterly inflation report, could announce an additional £75bn worth of asset purchases to reignite the UK economy. Data from today’s GDP or MPC minutes appears to emphasise this fact.

We saw stocks fall off in reaction to the worse than expected GDP reading, with the FTSE 100 trading down by 20 points on the day, whilst the pound sterling was broadly unchanged.

The lack of significant market reaction is likely to be down to the fact that today’s data will have been of no real surprise to most spread betting investors.

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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