European equities look set to open a few points lower as fear of a QE slow-down ensues.
Across the pond yesterday various Fed Presidents gave their views on quantative easing. Hints that the Fed may ease back on its bond-buying program eradicated any gains made previously in the equity markets. Speculation surrounding QE should be given some clarity this week as Fed Chairman Bernanke speaks and FOMC minutes are released. For the Dow Jones today, the remarkable trend of 18 straight Tuesday gains on the trot will be tested in what should be a fairly ‘fearful’ day of trading.
Having closed at its highest level in 13 years yesterday, all of a sudden, the FTSE also looks set to follow its American counterparts and break its all time high; which was set back in the last millennium (just) on the 30th December 1999 at 6,930. Although it’s unlikely this week, with sharp moves to the upside doubtful given such currently highly inflated prices, it shouldn’t be too long if we remain avoid of bad news.
Gold closed just under $40 up at £1393.4 yesterday and is dropping off this morning due to a stronger dollar and continued outflows from exchange-traded products. The precious metal has dropped by around 20% this year so far in light of an improving global economy as is evident by record highs being reached in the equity markets. This has caused many investors to shift their portfolios so they can take a slice of these higher-yielding opportunities. Physical demand has dropped off and many are expecting the Fed to stop its monetary easing measures which could add downward pressure to the price. For many, the only glimmer of hope is if the Fed doesn't deviate from its current stance which would be supportive of the price.
Brent for June delivery closed at $104.74 yesterday approaching the $105 mark on concerns that rising Middle East tensions will outweigh demand worries. Downward pressure has been put on Brent lately after worries that data may show sluggish growth in key economies where the most Brent is used. On top of this inventories have been growing but, a fall of 400,000 barrels which is expected when numbers are released later today may aid prices.
Marius is a Dealer at Capital Spreads. His involvement with CFDs and spread betting started in 2008 after graduating from London Metropolitan University with a MSc in Finance. He contributes to the Daily Comment by providing a snapshot of the FX, indices and commodity markets (oil and gold).
Jonathan is a dealer at Capital Spreads. Having started his career in the city trading interest rate and bond derivatives in 2005, he then entered the spread betting and CFD industry in 2007 by joining the dealing desk at City Credit Capital. After successfully managing multiple asset risk books across the European, US and Asian time zones throughout the height of the financial crisis, he then took that experience to Capital Spreads in 2010.
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