This week’s financial spread betting update is now available and can be read by clicking here.
In early trading this morning stocks have continued with strength from last week but are currently still below the downward sloping trendline on the S&P 500 that we discuss in this week’s update. The dollar is also on the back foot.
The Bank of England last week extended their quantitative easing programme by £75 billion as we had expected that they might when we wrote about that possibility here several weeks ago. This had the effect last week of initially sending the Pound lower but it then recovered and is further ahead this morning. The trend however is still very much down and it remains to be seen as to whether there is sufficient strength remaining for the pound to test and clear resistance around $1.5750.
Whilst the case for QE could possibly be argued back in 09 at the point of the crash, which at the time certainly had the effect of stabilising the markets, it is certainly of questionable value now.
Are policy makers ignorant of the fact that in 1991 the Bank of Japan threw 100% of GDP at the economy and 2 decades of deflation have since followed and their stock and property markets are still at a 75% discount to 1990 levels? On that basis, the £275 billion that the Bank of England has used is almost inconsequential, as the equivalent stimulus in UK GDP terms would be over £2 trillion! The only likely outcome of the current stimulus is further short-term inflation but little if any impact on the economy. So, as we have said before, the UK, US and Eurozone all seem to be heading down the wrong path.
This week’s financial spread betting update begins with:
The past week saw new 1 year lows for the stock market, followed by a sharp rally for most of the week, which only ran out of steam on Friday. As ever the inverse relationship between stocks and the dollar is still in play, but not as much as normal. Such a move in stocks would normally correlate with a much larger down-move for the dollar, but the dollar ended the week down but not significantly so.
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