Spread Betting Market Performance
The Spread Betting Trading Centre got in contact with some of the biggest spread betting firms to get their views on market conditions, in light of the current market volatility and the FTSE 100 dropping below 6000, and to get their observations on the trading activity of their customers.
Simon Denham from Capital Spreads comments:
As you would expect our trading volumes and active client numbers have gone through the roof in the last few weeks.
Also, as you would expect, we have had some massive winners and some big losers. Oddly (given that we offer a leveraged product) our clients have, net, only lost about 7% of total funds on account which is slightly less than the fall in the overall markets.
The fall today [16.08.07] I did find a bit OTT as the overall market situation is not really that grim just now. The problem we now have will be investor nervousness where every down move will become exaggerated and every up move will be on poor liquidity.
Technical chappies are also very unhappy about the fall through the 5970 region as this seems to indicate a fall down below 5500 may be on the cards.
My best advice is to only buy on very sound fundamentals.
David Jones, Chief Market Analyst at CMC Markets told us:
Equity markets remain squarely on the back foot as concerns continue to prevail over the extent of the US credit market shake-out. There was perhaps some positive news this morning [16.08.07] with a bullish retail sales figure out of the UK, but this certainly hasn't been sufficient to provide any real support and once again it's going to be sentiment on Wall Street that provides the real direction. Normally after such a big decline we may be eyeing some kind of recovery rally, but there still seems to be more downside left - US housing sales have perhaps come in looking very soft, whilst weekly jobless claims are edging higher, again suggesting business may be losing its nerve. The repeated fact is that at least in the UK, so far it's a market as opposed to economic problem, but the global nature of business means that we can be far from certain that this concept will hold in the longer term and as a result it's still naïve to assume that we're anywhere near close to the end of the run lower.
Tim Hughes from IG Index said:
Volumes are very high as you’d expect as our clients are dealing so much. It’s not as easy to establish a bull/bear consensus though as we’re seeing lots of everything. In this way our clients reflect the current chaotic feeling of the market. A proportion naturally decide to stay on the sidelines until things settle down a little but most see this as a fantastic opportunity – almost unprecedented volatility.
The last few weeks have seen two record days for IG in terms of volume of deals. That too is reflected by strong market volumes even though it’s August.
As for where it’s heading… I think it’s significant that 6000 has been broken but if the market can recover to above this level swiftly then this mightn’t be too worrying. It’s very difficult to know where this will end though, but the problems are fundamentally financial and there is truth in the assertion that they will not automatically spill over in to the wider economy.
Salim Sebbata, Senior director, UK retail at E*TRADE commented:
Volatility presents opportunity. One of the great advantages about spread betting is that you can trade most of the indices and currencies--long AND short, so you are not tied into just buying stocks. One indicator to watch is the VIX, which tracks the volatility of US stocks. It has been low but has now risen strongly--the second time it has happened this year.