Market Comment 24th July 2012

The panic that has amassed over the last couple of trading sessions has been compounded by bans to short selling by both the Spanish and Italian regulators. 

When investors are scrambling for the exit and many looking to cover their long exposure they find that they can’t hedge long positions and in many cases meaning they have to sell outright. Not only are such bans counterproductive by reducing liquidity, but they instil panic at a time that confidence is paramount and ultimately they don’t prevent an asset that is doomed from being sold aggressively pushing its price lower and lower. If a company looks like it is going to go bust then no investor is going to hang around to pick up the pieces. They are going to run for the exit faster than you can say “sell” and no ban on shorting is going to make it ease the pain. It’s short sightedness such as this that prevents accurate free market pricing but for the regulators they can say to the wider community that it is doing “something” to prevent “spivs and speculators” from driving share prices lower.

Of course it had to be the regulators of the countries that are at the epicentre of the crisis who have imposed the bans adding to the worry and uncertainty that’s spooking investors. It comes as little surprise but begs the question, is there something they know that we don’t?

Also this morning we have seen Moody’s put financial power house Germany on downgrade watch which has prevented the FTSE from adding to our earlier calls of a positive open. In fact the index opened higher by some 20 points and has already reversed those gains swiftly taking us into the red. With question marks over the prized triple A credit rating of Europe’s largest economy the markets are likely to remain on the back foot, and to add to Germany’s issues this morning they have just seen their manufacturing and services PMI survey released worse than expected. Growth in the eurozone is very hard to come by nowadays and this is affecting Germany’s activity too as well as here in the UK. Just a couple of days before the Olympics are due to start tomorrow’s UK GDP figures will be closely watched.

Rising uncertainty regarding the Spanish regional governments’ debt triggered fresh concerns that Europe’s crisis could get worse driving US markets lower yesterday, but they managed to bounce from their lows which has helped prevent a wider sell off in Europe so far this morning. The troika are due to visit Athens today to see how Greece is getting on with its reforms and attempts to reduce their vast debt mountain. If there are more calls for funding to stop, as rumours have suggested in the case of the IMF making such threats, then another bout of fear could get investors reaching for the sell button.

Despite closing rather flat for the day at $1.2114, the common currency reached another record low at $1.2065, last seen in June 2010. The driver behind it was undoubtedly an increase in the number of regional governments asking for financial bailout in Spain which saw its yields on the 10 year bonds rising to another record of 7.59%. There don’t seem to be many buyers out there willing to take the single currency and this morning EUR/USD is at 1.2105.

Gold declined $7.10 to $1576.50 pressured by a higher greenback as the euro zone crisis seems to be worsening. The yellow metal failed to attract safe haven demand which instead went into the US dollar. However, in the bigger picture the $1560 - $1590 sideways range remains firmly in place.

The WTI crude prices tumbled sharply yesterday losing $3.47 to $88.14 on renewed concerns over the soaring cost of borrowing in Spain. That easily trumped geopolitical worries in Iran and reports of a pipeline explosion in Turkey. A stronger US dollar gathering pace is also working against any meaningful attempt to push crude oil higher.
comments powered by Disqus

All Market Comment News



Trusted Firms

All Reviews
AUD/USD update (23rd April 2014, 14:00) 23 Apr 2014

The Australian dollar has slipped following softer-than-expected inflation figures.

EUR/USD update (23rd April 2014, 13:00) 23 Apr 2014

The EUR/USD is higher after the eurozone manufacturing and services report exceeded estimates.

Market Comment 23rd April 2014 23 Apr 2014

European equities are set to open mixed as traders remain cautious. 

GBP/USD update (22nd April 2014, 19:00) 22 Apr 2014

GBP/USD looks set to continue its move higher, as it consolidates above $1.68.

EUR/USD update (22nd April 2014, 18:00) 22 Apr 2014

The EUR/USD is trading around the $1.38 level as traders return from the Easter holidays

Market Comment 22nd April 2014 22 Apr 2014

European equities are set to grind higher tracking a positive session overnight in the US. 

EUR/USD update (16th April 2014, 14:00) 16 Apr 2014

The euro is higher versus the US dollar, after the level of inflation in the eurozone remained unchanged in March.

GBP/USD update (16th April 2014, 13:00) 16 Apr 2014

UK unemployment has now dipped below 7%, the initial threshold level the Bank of England introduced in August but reneged upon last month, which has s...

Market Comment 16th April 2014 16 Apr 2014

European equities are set to open higher tracking an overnight surge in the US markets. 

EUR/USD update (15th April 2014, 15:00) 15 Apr 2014

Having popped its head above the $1.39 level at the tail end of last week, EUR/USD has found itself pulled back.

Market Comment 15th April 2014 15 Apr 2014

European equities are set to open flat as they’re caught between two competing poles of sentiment. 

AUD/USD update (14th April 2014, 18:00) 14 Apr 2014

The Australian dollar is gaining ground against the US dollar, as traders prepare for the latest minutes release from the Reserve Bank of Australia.

EUR/USD update (14th April 2014, 16:00) 14 Apr 2014

The euro is under pressure against the US dollar as tensions in eastern Ukraine weigh on the currency.

Market Comment 14th April 2014 14 Apr 2014

European equities are set to start on the back foot as last week’s negative sentiment remains firmly intact. 

GBP/USD update (11th April 2014, 16:00) 11 Apr 2014

After touching $1.68 yesterday, sterling has dropped back, hit by weaker UK construction output figures.

EUR/USD update (11th April 2014, 16:00) 11 Apr 2014

If we see the euro close above $1.39 today, then it will be the icing on the cake for the currency, which has enjoyed a remarkable week.

Share this with your friends

Your comments:

Market Comment 24th July 2012

The panic that has amassed over the last couple of trading sessions has been compounded by bans to short selling by both the Spanish and Italian regulators. 

Read more »

Connect to successful traders – join free now

Log In or Sign up

Facebook User?

You can use your facebook account to sign up with Live streaming sport.

Connect with facebook
Remember me.
Did you forget your password?