What Weak Global Economic Data Means for Futures Traders

Posted by Deb | Guest Post | Saturday 7 April 2012 10:45 pm

Your Way To Financial Freedom

Guest post contributed by Hayley Russell, a freelance forex currency trading writer, on behalf of sunbird cfd trading. All views and opinions expressed are those of the writer and do not necessarily represent Sunbird forex brokers.

It wasn’t that long ago that Europe agreed to bail out Greece. However, low interest rates, and a free-flowing monetary policy hasn’t stopped Europe from entering another financial ice age. Europe looks to be in another, new, recession, and there’s no one coming to the rescue.

America can’t save Europe. It has its own financial problems. Back in 2010, Fed Chairman Ben Bernanke set the U.S. up for its current financial woes by writing:

“Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. … And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

Surprisingly, his view hasn’t changed much since then. Benanke’s ongoing insistence that quantitative easing will lead to a “virtuous cycle” of growth and profits (and higher income) is lost on the marketplace, which is seeing the velocity of the M1 money supply fall precipitously. This means that the Federal Reserve is pushing more and more money into the banking system, but banks aren’t lending. If banks aren’t lending, none of Benanke’s predictions can come true.

What’s worse, China has started to contract and is focused on protecting domestic supplies of rare Earth minerals and other natural resources. Spain may be next in line for a bailout, since the country is about to be hit with a wave of mortgage defaults. Where does all of this leave futures traders? Right now, the markets are taking a beating. Natural gas has recently hit a 10-year low.

The Dow Jones Industrial Average futures are off by about 70 points, and S&P500 futures are down about 9 points. NASDAQ futures are down 14 points. Futures traders don’t have many options these days. Europe has to contract for the foreseeable future.

The Greek debt crisis is far from over, and other European countries are just starting to join Greece. With Italy’s high unemployment rate, Spain, Portugal, and Ireland’s financial problems, and Greece’s inability to repay its debts without being bailed out, the European union will not be a great place for investment going forward.

China has to contract too. It’s been growing at an unprecedented rate for the last 10 years. However, none of that growth has been accompanied by long-term earnings. Back in 2009, China urged its citizens to buy gold. Perhaps it suspected its reign was coming to an end. By buying gold, the Chinese markets would deflate. Perhaps the real estate market would also contract. Buying into precious metals would help stabilize the economy since money would be moved out of the yuan and into an asset that is not backed by debt.

It seems like a Chinese commitment to buy gold would help gold futures, but it’s not. Gold futures are down and the precious metals market, in general, has been taking a beating lately. India has recently placed a higher tax on gold bullion purchases, helping to depress the price of gold while gold futures have dropped to their lowest levels since mid-January.

Gold futures are expected to find support at $1,612 per oz, which might help investors. However, the precious yellow metal has been under pressure recently due to hedge funds and other institutional investors selling off long gold positions.

Oil, another favorite of the futures market, is also down. Copper, grains, soybeans, and even coffee futures all slid this week. It may be time to for investors to give up the futures market for now and retreat to higher ground. Until or unless global economies recover from their financial problems, there’s not going to be much of a future to invest in.




Your Way To Financial Freedom

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4 Comments »

  1. Comment by Carmen — April 13, 2012 @ 8:18 am

    You did a great job. Thanks for sharing your informative post with us. I am a newbies and I think these blog could help me.
    Carmen recently posted..Dating Advice For Couples

  2. Comment by Maryden25 — April 17, 2012 @ 12:12 pm

    Thanks for posting this informative blog post. This is very essential to all the metal industries and business related companies like pawnshops and gold smith.
    Maryden25 recently posted..Green Mountain Coffee Coupon

  3. Comment by Rox from Price CPAs — April 18, 2012 @ 3:18 pm

    Excellent analyses on economic data. Well it seems that its not yet good to invest in the industries you mentioned with all the economic data you provided. However, investors may still find niche industries to invest in for the meantime. :)

  4. Comment by Heidi19 — April 20, 2012 @ 6:11 am

    Great article to read! and providing us this information is really a big help. Thanks for sharing this with us and i’m looking forward to read more from you.
    Heidi19 recently posted..Arowana – a prized investment catch or …

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