Traders’ pessimism increases

Looking ahead to the US open, it appears unlikely that the mood will change on trading floors.

The poor performance of the commodity markets has dragged down those of the mining and oil stocks, which are such a large component of the FTSE, it is unsurprising that the index is down almost 1.5% on the day. A number of commodities have reached or even breeched important technical levels, which could trigger bigger falls yet. Although demand from the US is improving, it is not growing at a fast enough pace to cover the reducing demand from China.

Equity traders have currently got more to worry about than just the prices of stocks and shares falling. Once again the European sovereign debt markets are showing some worrying signs. The four countries that are currently most highly being scrutinised are Slovenia, Spain, Portugal and Italy. Slovenia and Portugal currently have their yields around 6.5% and are worryingly close to the danger level of 7, but it will be even more concerning if either Spain or Italy increases too much above their current 4.7%.

Equity volumes for the FTSE have been very low for over a month now, and subsequently the volatility index is at around a nine-month high. Without the onslaught of the buy on dip traders, it looks set to oscillate aggressively.

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