Joshua Raymond, Chief Market Strategist, at City Index (http://www.cityindex.co.uk/), provides insight into the market activity that shaped spread betting and CFD trading on 13th September 2011:
“European stock indices recovered from losses of between 1% and 2% on Tuesday to trade higher led by bargain hunting in the key European banks that have been hard hit recently, but longer term sentiment remained fragile over the sovereign debt situation and high bond yields for Italy.
The small bounce on the open for European stock markets, on the back of talks for China to buy large amounts of Italian bonds and take stakes in Italian firms, was short lived, with investors continuing to take their lead from bond markets, where the benchmark Italian 10-year bond yields continue to race higher.
However, as the afternoon session begun, investors started to trade with more of an opportunistic edge and attempted to pick up some of the badly beaten banking stocks that had been aggressively sold off of late on optimism that they could be due a short bounce.
French banks in particular saw strong gains with shares of Societe Generale rising near 15%, having opened heavily lower again, whislt BNP Paribas also saw gains of around 7% on the day. The bounce, boosted primarily through bargain hunting, is no real surprise given the huge falls suffered by these banks of late, and Soc Gen in particular hitting fresh 19 year lows. Volatility in these stocks is likely to continue, both to the downside and upside with expected large price swings until investor uncertainty over the sovereign debt situation is calmed.
It was this bargain hunting that helped to lead European stock Indices from their lows into the close. The FTSE 100 rose 44 points to 5174, whilst the DAX rose 1.8% on the day and the French CAC, which has badly suffered as its banks were hit by selling waves yesterday, posted gains of 1.4%.
There was initial scepticism towards the talks between the CIC and Italy, which was later rumoured to have not been about buying Italian bonds, but rather taking stakes or investments in Italy’s Industrial sector. This caused Italian 10yr bond yields to rise further on the day to trade at a yield of 5.712%, which will likely keep stock markets and investors fairly jittery.
A longer term Italian bond auction this morning reminded investors at just how much confidence in Italy’s ability to meet its debt obligations in the long term has deteriorated. 5yr Italian bonds were sold at an average yield of 5.6%, which is the highest yield for 5yr bonds since the inception of the euro.
From a technical perspective the FTSE 100 recovered from support at the 5070 level, which breeds some near term confidence but in truth until the UK Index can break above strong resistance at the 5450 level, rallies will likely remain choppy and fragile.”
About City Index:
Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.
As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFD trading (http://www.cityindex.co.uk/cfd-trading/) and, in the UK, financial spread betting (http://www.cityindex.co.uk/spread-betting/).
We constantly look to widen the range of assets we offer, improve the performance of our platforms and expand the range of services we provide. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer service and support. For more information, visit http://www.cityindex.co.uk/.
