How the volatility of the market can be seen every day! Yesterday, the London financiers were out there celebrating on their 14-year high and backing that the ‘only way was up’. Then today they woke up too late after hitting the bottle too much and now that high has dropped as China’s economy is causing greater concerns for the rest of the financial world.
How things change in the space of just a few hours. Nothing is constant and nothing lasts forever. But a rose by any other name still smells of the same thing and here it is pretty much of a stench. People might be harping on about the bankruptcy imminently to be announced by Mt. Gox and the collapse of the Bitcoin Foundation just over the horizon, but aren’t the financial markets doing the self-same thing and just virtually inflating their own markets?
Yesterday shares around the world reached highs amidst a succession of mergers. The FTSE 100 hadn’t been that high since 2000. But, it was only analysts that stood back and calmly stated that there needed to be supporting arguments to believe that the economy was out of the dark ages and into brighter times. They were right today and it was only false hopes and wishing that pushed the markets higher yesterday.
• It was all virally emanating from Wall Street which saw the S&P 500 hit an all-time high, closing up 0.62% at 1847.
• The Dow Jones Industrial Average increased to 16207, up 0.6%.
• The NASDAQ rose 0.69% to 4292.
• The FTSE 100 closed at 6865, with an increase of 28 points.
• That’s just 70 points short of the dotcom days of 1999 when the old year went out with a bang.
• Investors around the world are confident (perhaps overly so, as usual) and the Facebook purchase of WhatsApp has something to do with that buoyancy.
• But balls eventually stop bouncing when there’s no momentum left.
• There was also talk of the merger going on between Dixons and Carphone Warehouse in the UK that had some effect on investor confidence.
• Although you only have to look at Consumer confidence to get some of the picture.
• The figures released today show that they are lower than expected and stand at 78.1, rather than the estimated 80.
• What exactly do consumers have to be confident about?
As usual the market was not showing the reality of the economic situation and we have been hearing of over-pricing in the market for weeks and even months now. But, some in the UK are expecting the FTSE to go beyond the 7000-mark in the next few months. Europe was doing much the same thing and was riding on the crest of that wave too.
• The DAX increased by 0.5% yesterday by close and Spain saw a 1.2%-rise.
• But, on opening today the Dow Jones Industrial Average had already lost 52 points to 16154, or 0.3%.
• The S&P 500 also dropped 1.8% or 0.1% to 1845. Where did all the confidence go?
Have the investors suddenly woken up to the fact that it’s all based upon nothing? The highs that we are experiencing are nothing more than fabricated evidence and that it’s pointless throwing money out of the windows and let alone a helicopter unless the economy is really stabilized.
• France has just announced that it will miss its deficit target set for 2015 (3.9%).
• So will Spain (6.5%).
• That will mean more budget cuts in the future.
• The forecasts just released on growth by the European Commission say that GDP will grow by 1.2% in 2014, rising to 1.8% by next year for the EU.
• Cyprus will suffer a worse contraction than economists had forecast for this year, down by -4.8%.
• Inflation has also been lowered from 1.5% to just 1%.
The FTSE 100 dropped this morning by 61 points, or 0.9% to 6804 by mid-day today. Now it is down 0.41% at 6810 at 15.45 GMT. So is it going to reach the 7000-mark and break the records? It was the Shanghai Composite that dampened the confidence of the investors this morning as it recorded its biggest decrease for the past half year, down by 2%.
• The Shanghai Composite fell because there was an unexpected slowdown in house-price growth according to figures released yesterday.
• The housing bubble has been in the spotlight for the past few months now and there is a prediction that it is getting closer.
• Banks are also slowing down on their lending and the government is placing a tighter control on credit.
The London Stock Exchange is like a bipolar sufferer going from one extreme to another, constantly on the medication. We are just watching them go through their elevated agitated mood of euphoria, mania. The bout of extreme depression will follow, impairing not their but our ability to function in daily life.
That’s the good thing about their disorder. They get the euphoric partying stage and we end up with the depression.
Originally posted: The Ups and Downs of the Stock Exchange