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October Surprises
The US economy is one of the major driving factors for the world economy, if the US economy is doing well and consumers in the US are buying a lot of goods from other countries, stocks around the world stay high. Accordingly, when there is news that the US economy is in trouble, or facing further trouble, the impact is felt all around the world.
The US Federal Reserve recently announced that the country’s GDP might shrink in 2009 on the back of flat, or only marginal, growth 2008. Whilst in the long run it predicted growth in 2010, this news was enough to spark fears in Asia – in countries such as Japan who are already experiencing recession – that the United States might be about to join them in a period of what experts call ‘negative growth’. The US is a key market for Japanese firms such as Toyota, Nintendo, and Sony and if US consumers stop buying because the purse-strings grow tighter, it signals bad news for some of the biggest companies in the world.
Whilst share prices tumble around the world (the Dow is at its lowest level in five years), the recession offers some good opportunities if you are a spread better. Spread betting companies like Finspreads like to ensure that their traders know the risks that they are facing before they open accounts, and the best way to avoid risk is to trade on things that look certain. In the current climate, one of the few certainties is that certain sectors will experience falls in price, and if you know what events cause these falls, you may well be able to make some money.
If you take, for example, the commodities market, the sector recently experienced a bump on the back of the Chinese Economic Stimulus package which seemed to promise greater use of raw materials in the coming months. However, on the back of news that US economy is slipping, mining shares were among the biggest losers as fears that demand for steel and other commodities would fall if the economy slowed down. Likewise the price of a barrel of oil dropped even further and is now approaching $50 a barrel.
Both of these movements make sense, if things are being built, commodities price will go up, if it looks like they won’t the price will go down. The important thing is catching these announcements early, and trading before the market reacts fully, that way you will experience the biggest profits. It is vitally important, if you are to be successful with spread betting and CFD trading, that you stay absolutely abreast of all the events that may affect your particular market.
Disclaimer: The views and opinions expressed in the research published are those of the individual companies and writers and not necessarily those of Investorideas.com®, or any of the industry sector portals . At the time of publication, writers may hold positions in the stocks or companies mentioned.
Investorideas.com® or any of the industry sector portals cannot assure accuracy of the research presented. Investors are encouraged to research and verify facts and under no circumstances is Investorideas.com® endorsing the content as a recommendation to buy or sell stock.
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