Mike McCudden, Head of Derivatives at Interactive Investor (www.iii.co.uk), gives his thoughts on the last week of trading and looks ahead to what we can expect next week.
"It's been a week of woe in the markets as traders are finally coming to realise that all is far from well in the global economy. The FTSE 100 is looking like testing recent lows again as at time of writing we are sitting around the 5870 level. We are seeing lower volumes from our spread betting and CFD clients as they wait and see and set up orders trying to capitalise on a break out from the range. On any move in the FTSE to the downside look for support around 5830 and then 5790.
"With poor manufacturing numbers from the US and UK and China's provincial debt problems sending markets in to freefall we have the clearest indication yet that the global economy is slowing. The slowest UK manufacturing growth in two years reinforces the case against any interest rate rise in the UK and suggests that quantitative easing may well be back on the agenda.
"Sterling naturally got hammered and when you throw Greece into the mix of global woes, with a Moody downgrade, traders are scratching their heads and looking desperately for a glimmer of good news anywhere. Moody's suggest there will be a funding gap of around E30bn next year and thus a 50:50 chance of default. There may be a glimmer of hope from jobs figures from the US this afternoon or even the eagerly anticipated non-farm payroll number on Friday but let's not get our hopes up...short sellers smell blood and analysts have been slashing their expectations. As the US had its biggest one day fall for a year on Wednesday we may see the market pause for breath and regroup going in to the weekend.
"Next week we have a rate decision in the UK which will be a sideshow. Expect more commodity led volatility in equities as we continue to re-examine the global growth story. No doubt the Eurozone will again be a key topic as we continue to speculate what next for the region. Will the focus shift to Spain, can the manufacturing and export led economy of Germany withstand the storm as the world goes in to slow down. We shall see."
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