Monthly Review
Welcome to our Monthly Review, covering March 2009, which will keep you up-to-date with the major events and trends from the past month, plus the latest developments and offerings at IG Index.
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A month of two halves for FTSE® 100
The weakness dogging the FTSE® 100 Index for the past 12 months continued into early March, with the index trading through last year's lows and slipping below 3500 for the first time since March 2003.
Keeping the weakness going at the beginning of the month were continuing worries about the banking system and fears about the survival of the big US car manufacturers. But a combination of factors – namely a shift in sentiment towards banks prompted by a memo from Citigroup suggesting it was having its best quarter for some time, and an announcement of a surprise bond-buying package by the US Federal Reserve – helped drag markets back from the brink. This consequently set up a strong bounce back for the blue-chip index, which ended the month just below the 4000 level.
With this level broken in early April trading, it now leaves traders wondering whether this particular rally is going to be more than just the dead-cat bounces we have become so used to seeing over the past twelve months.
(IG Index price data: compiled 6 April 2009)
Oil prices hit three-month high
Following last year’s steep slide from the heady heights of almost $150 a barrel, the last few months had been something of a quiet time for oil. For much of this year, the price of oil had been stuck in a sideways range – slipping down to around $34 a barrel before bouncing back up and running out of steam around the $50-mark.
March, however, saw the price push out to its highest level since the end of November, giving the appearance the ceiling of $50 had been cracked once and for all. Many put this down to a more upbeat economic outlook – with traders taking the view that a recovery in the wider economy would lead to an increased demand for oil.
How sustainable this ends up being remains to be seen but, following the recent bout of directionless trading, the price of oil will be an interesting one to keep an eye out for in the months to come.
(IG Index price data: compiled 6 April 2009)
US Fed announcement gives EUR/USD a boost
After spending much of the year in decline, the EUR/USD currency pair had a rocket put under it in mid-March. The pair had shown signs of a halt in decline ahead of last year's lows in the 1.2300/1.2500 area, but it was still trading down by around 10% (year-to-date) as March started.
All this changed around the middle of the month. The surprise announcement by the US Federal Reserve to buy up to $300 billion worth of government debt put pressure on the US dollar, sending many currencies (including the euro) soaring against the US dollar.
The rally ran as high as the 1.3700 area before petering out. With EUR/USD stuck in the middle of its recent range, traders seem to have a split opinion at the moment about which way the next major move is going to be.
(IG Index price data: compiled 6 April 2009)
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