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MARKET STRATEGIST
josh@cityindex.com

Q. Dear Josh, what are the markets expected to be like during the World Cup?

A. If you were thinking that traders are likely to be keeping a close eye on the World Cup and that this could affect volumes, then you are right. Historically, the financial markets have tended to be particularly quiet during any major sporting event.

With the sovereign debt crisis still having a strong and volatile influence on the financial markets, this could deter even more traders this summer. But this could be dangerous – low volumes can make the markets even more volatile. So, if you are spread betting during this period you will need to think about risk management.

That said, this World Cup could be slightly different since it is taking place at a time when the markets have already sold off quite aggressively. The FTSE 100 lost as much as 14 per cent from its April high to last week’s low and the Spanish Ibex has lost 26 per cent. This could well keep traders interested, particularly if they feel that there are bargains to be had.

And let’s not forget the emergency Budget due out next week which will grab the attention of the market.

Q. Dear Josh, BP’s shares are very volatile. How can I protect myself if I am trading the stock?

A. BP’s shares fell to a new 13-year low last week, and by as much as 49 per cent since its April high, which is an aggressive loss. The best way to manage your risk in spread betting is to use a guaranteed stop loss. A stop loss is an order to close an existing trade at a specific level in the market determined by you. But a guaranteed stop loss means that, regardless of moves in the underlying price, your order will be closed out at the level requested, even if the market gaps. But be aware that guaranteed orders do carry a small extra charge.

Q. Dear Josh, what economic data is there to keep an eye out for this week?

A. Lots, is the answer. Today we have some EU industrial production figures, economic forecasts from the UK Office for Budget Responsibility and the Bank of England’s Quarterly Bulletin. Tomorrow, traders will be keeping an eye out for UK inflation data, German economic sentiment and the US Empire manufacturing survey.

We also have UK unemployment and US industrial production due out on Wednesday, while the monthly report from the European Central Bank, UK retail sales, US inflation, Philly Fed and UK public finances are all likely to keep everybody interested as the week draws to a close.

If the World Cup hasn’t swayed your focus, that is.