Weekly Trading Update
15.06.12 Friday Morning
Global markets began this week with a roar of optimism as traders bought into the short-term fix offered by various Eurozone members for Spanish banks in the form of a token 100 billion Euros to save Spain’s faltering banks.
Nevertheless, this advance was short-lived as bears sought to remind the markets that the meagre amount provided to Spanish banks was not enough to compensate for a prolonged exposure to toxic debt particularly caused by a collapsing Spanish property market as well as catastrophically high unemployment claims. The heroes of the day, the banks, quickly became the villains leading global declines.
However, Spain could not hide behind Italy’s debt problems for long, as Spanish bond yields peaked close to the psychologically 7% level following rating agency Fitch forecasting that Spain would miss its budget deficit targets in 2012 and 2013.
The US also had an opportunity to contribute some chaos into the markets by introducing a collection of poor economic data including worse than expected monthly retail Sales as well as weekly unemployment claims. Once again calls for another round of Quantative Easing were voiced, only to be met with silence from US officials.
Short- term trading was the approach taken towards the latter period of this week as any gains arising from news that pro-austerity parties were taking the lead in Greece were quickly crystallised by traders due to an opaque view of global growth constraining any long-term holds for traders.
The final trading day before the Greek elections proved fruitless. It seems now that only bulls are left, albeit probably in their few, as markets built on positive news that The Governor of The Bank of England, Sir Mervyn King, was injecting around £100 billion into the banking system to encourage lending to small businesses.
The European Central Bank president, Mario Draghi, also followed suit with similar remarks this morning allowing banks to once again take the lead within the FTSE 100.
Open (Monday)
1.5563
Close (Thursday)
1.5561
Change
0.013%
High
1.5598
Low
1.5464
Open (Monday)
1601.9
Close (Thursday)
1625.8
Change
1.492%
High
1628.8
Low
1582.7
Open (Monday)
12734
Close (Thursday)
12660
Change
-0.581%
High
12751
Low
12401
Open (Monday)
5529.5
Close (Thursday)
5470
Change
-1.070%
High
5553
Low
5384.5
However, an unexpected victory for anti-austerity party Syriza could eventually lead to Greece’s departure from the Eurozone but could provide investors with a more transparent long-term picture of global growth. Albeit a picture which is dressed in financial meltdowns across global banks.
See our Economic Diary here.
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