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Mike van Dulken, Head of Research at Accendo Markets, commented in his Weekly Roundup:
Accendo Markets is an online trading services provider, offering CFDs, spread betting and forex to retail (private) clients. Accendo Markets was established in 2007 and has since gone on to win various awards including “2012 Winner of Best Execution only CFD provider” at City of London Wealth Management awards. Accendo Markets Ltd. is authorised and regulated by the Financial Services Authority (FSA).
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Indices on both sides of the Atlantic continue their northerly march. Several have made multiyear even all-time highs. Brokers have increased index targets yet again. What economic problems you say! The gains have prompted the usual debate about whether we have gone too far or whether the trend still has legs. Pedestrian progress this week and a couple of pullbacks have led to suggestions of momentum waning and a correction due (something we’d been looking for as the market paused at, then pushed right through 6,400). This has also brought about the theory of cautious optimism keeping things ticking higher, with a drip feeding of money into the markets by investors eager to partake in the uptrend but keen to keep some powder dry in case the proverbial spanner finds its way into the markets works.
Japan is still benefiting from the prospect of a big round of emergency monetary printing by the BoJ when the new governor takes office next week. Debate still rife as to whether good US data brings us any closer to reduced/end of money printing by the Fed (foundation of recent rally?), or whether good data is nice to see but not yet enough. This implies that good, bad or awful data means no change to the Fed status quo and that only thing to stop the printing presses would be great data (growth or unemployment) meaning it is no longer warranted. Need more ink Chairman Bernanke?
Major data this week comprised a better German Trade balance, but poor French, UK and EZ Production data highlighting the risks of a two-speed Europe, even among more stable supposedly less worrying non-peripheral nations. A set of Chinese inflation and production data also confounded views on the #2 world economy’s recovery progress. Spain managed to sell debt at better than expected yields although peripheral peer Italy continued to suffer from its political disarray, paying more than previously for both short and long term borrowing.
The UK’s trade balance may have improved but expectations of the nation avoiding another foray into GDP contraction soured after the NIESR’s 3-month estimate went negative and the prior month’s reading was revised below water. Ahead of Chancellor Osborne’s 4th budget next week he has in the last few weeks seen both his prized AAA lost and a potential triple-dip recession gained. Shadow Chancellor Balls is sure to continue taunting him, maybe even suggesting he takes a run and triple-jump next week and gives up on the coalition’s failing Plan A.
Over in the US, there was more reason for cheer after the pleasing Non-Farm Payrolls of reading last Friday. Retail Sales and Industrial Production were ahead of expectations and Jobless Claims added to the upbeat mix with weekly claims falling to a 5yr low and continuing claims falling closer to the key 3m mark. While sentiment may have been dented slightly this afternoon, after a surprisingly poor reading from the Uni of Michigan Consumer Confidence index, support for the FTSE100 has kicked in at 3-week rising support at a level highlighted in our daily FTSE 100 Focus publication.
While the UK’s flagship index will likely close around 6,500, having made limited ground over the week, it did test higher and recovered from a couple of mini-corrections which is good price activity to see. In fact the 350pt/5.3% round-trip for the week is just what short-term traders like to see. Discussion is sure to continue as to whether the Michigan reading implies US consumers losing patience with the US budget bickering in Washington, and whether markets fear the eventual removal of the cheap money risk-prop and the negative long-term effects of all this extraordinary monetary policy but overall, risk appetite appears to remain strong.
Next week is unlikely to be an ordinary one with the German ZEW surveys always good for a sentiment swing, US Housing for another gauge of consumer sentiment, the UK Budget, BoE MPC Minutes and US rate/QE decision on Wednesday, and a raft of European PMI data on Thursday and a return to more German business surveys with the IPO on Friday. Lots to keep the markets moving.
As always, enjoy your weekend, and wish the Accendo team luck in the City of London Wealth Management Awards on Thursday, where we hope to retain the title “Best Execution Only CFD Provider” for the 5th year in a row thanks to our unique approach setting us very much apart from and ahead of the competition.
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