A UK Spreadbettor’s ‘Wunderweek’
Crunching Numbers with Spreadbetting on Major Averages
When George Osborne delivered his budget address to Parliament on Wednesday, 16 March, the immediate impact was a weakening of the GBP against the USD and a basket of currencies. However the sterling and the FTSE 100 index rallied soon after and this prompted a flurry of spread betting activity for the remainder of the week. Spreadbettors were going long on the FTSE 100 index following the budget speech by the Chancellor of the Exchequer, with some spreadbettors having expectations of a 29-point hike for the morning of Thursday, 17 March. The performance of the FTSE 100 index however moved in the opposite direction and lost 0.25%, or 15.55 points to edge lower to 6,159.94. The day’s low was 6,125.70 and it opened at 6,175.49. For the year-to-date, the FTSE 100 index has lost 1.32%, and -6.09% for a full year. On Thursday, the 101 member index sported 57 members down and 42 members up.
Meanwhile across Europe, equities markets enjoyed a bullish start to the day in the run-up to the weekend. Sentiment was generally boosted by the decisions taken by the Federal Reserve Bank on Wednesday, 16 March. The FOMC statement was clear: the number of interest-rate hikes in 2016 would be limited, possibly to 2 and this drove sentiment on equities markets which reacted positively to low or no interest-rate movements. The German DAX initially opened up higher for the day, but also shed 1.74%, as it moved towards 9,809.36 points. The day’s high for the DAX was 10,055.29 points, and the day’s low was 9,753.04 points. For the year-to-date, the DAX shed 8.69%, and the 1-year return is -18.13%.On Wall Street markets were mixed with the Dow Jones Industrial Average opening slightly lower following Yellen’s speech, the S&P 500 index opening lower and the NASDAQ Composite Index also opening lower.
Record Low Interest Rates in the UK
Of course, the big news emanating from England was the budget speech and its impact on equities markets which have been faced with record low interest rates for 7 years. Prior to the opening bell on Thursday, major spread betting companies in the UK were calling on the FTSE 100 index to start the day at least 10 to 15 points higher in the range of 6,188 – 6,195. As it turned out the FTSE 100 index opened at 6,175.49. Across the Atlantic, the Fed decision was an important one for the US and the global economy since it signaled that structural weakness outside the US remains a concern to domestic policymakers. It’s not only major averages that are impacted by the Fed and the budget speech in the UK, it’s also currencies. The Fed decision sent the US dollar scampering for cover. Without interest-rates bolstering the strength of the USD, it lost ground against a basket of currencies across the board. The recovery in the GBP/USD currency pair was particularly notable. Clearly, buyers are running the show again and greenback weakness may see the currency pair trading in the 1.44 range. Spread bettors are expecting a resistance around the 1.4330 level, but a high of 1.4450 is always a possibility too.