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Daily Market Report 22/12/2011

European Shares
European shares jumped on Wednesday on the news of a massive infusion of liquidity at the much awaited ECB tender, with banks gobbling up ca. €490 billion in three-year cut-price loans. The relief however proved to be short-lived on worries over how much of the funds would actually flow into struggling euro zone economies and help restore confidence. The liquidity injection is aimed to prevent an immediate credit crunch within the European banking system but with so many underlying problems still unsolved the way to the resolution of the euro zone crisis is still a long one. Due to the lack of the necessary market depth two trading days before Christmas it is difficult for any trend to be generated. The FTSE 100 is trading up at 5439 this morning. Should the index reach the range 5500 to 6000 points, equity investors will be on watch for a selloff. The UK benchmark index is on course for an 8% fall over the year, clearly better than the near 25% drop plunges for Germany and France.
FX Market
The sterling was surprisingly buoyed yesterday after the minutes of the Bank of England revealed hints about future stimulus, as some of the members were starting the argument for more bond purchases early next year. After hitting the high of 1.5727 the cable has consolidated at 1.5700 this morning. Despite the bullish tone to early trade the euro is trading at 1.3095 against the greenback, and it looks like the 1.3000 level is a very strong support level.
Commodity market
The precious metal is trading flat right above the $1600 level in thin trade as investors remain sceptical about the euro zone debt crisis. Gold prices will probably be trapped within the range of $1560 and $1650 until the end of the year. Brent crude is trading steady above $107 a barrel as investors weighed a sharp drop in U.S. crude stocks against persistent worries the euro zone debt crisis would curtail global oil demand.
Today’s Calendar
The UK economic calendar is quite today, with a swathe of figures being released from the other side of the Atlantic. At 13.30 GMT the US is publishing its weekly report on initial jobless claims as well as revised data on third quarter GDP. The University of Michigan is also to release revised data on consumer sentiment and inflation expectations.

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