BEARS GAINING GROUND AS GREECE PUSHES FTSE SLIDE
CHIEF MARKET STRATEGIST
THE impending arrival of Facebook into global markets did little to shore up optimism last week, as markets tracked relentlessly lower for the entire week.
As with the preceding week, Greece remained the centre of attention, dragging Spain and Italy into its mire. Better German GDP figures provided only the briefest relief from the unending gloom, and news that talks on a new Greek government had broken down once again prompted a flurry of selling in mid-week. US data also failed to live up to expectations, while Fed minutes didn’t suggest that the world’s largest central bank was any closer to pushing the QE3 button.
In sum, we remain in thrall to the Eurozone crisis, as the apparent exit of the Greeks from the currency plays out in slow motion.
Sentiment on the FTSE 100 has remained bullish throughout the week, but the bears have gained some ground, with the indicator shifting from 71 per cent long to 63 per cent long. This is likely a two-way thing, as some longs close out, while others initiate new short positions.
Sentiment on indices as a whole remains positive, suggesting hope that other parts of the global economy will at least offset the Eurozone crisis to a degree. However, if further losses result for London’s leading index, this trend of increasing bearishness could continue into June, as more clients opt to short the index.
The flight for safe havens is also seeing a drop in the number of clients who expect further increases in the value of the US dollar versus the yen. The crisis on the continent means that the yen is becoming a destination for worried investors once again, to the despair of the Japanese Finance Ministry, who are now hinting at more easing to help reduce the attractiveness of their currency.