How to Trade European Markets Following Positive Economic News

LONDON, May 29, 2012 /PRNewswire/ --

Learn how to trade on the future price movements of European markets such as the CAC 40 following positive economic news by spread betting with City Index.

In the following example, we look at how to trade the French CAC 40 market following positive economic news out of Greece on Monday 28 May 2012.

Positive Economic News out of Europe

Following the recent wave of negative news out of Spain, Greece and Italy in recent weeks, the strain was lessened somewhat on Monday when opinion polls revealed that Greece's pro-bailout parties were starting to take a lead over the anti-austerity Syriza party.

For many investors watching developments in Greece closely, this brought a certain level of optimised as it reflected that they would be more likely to form a government in favour of maintaining their presence in the eurozone, should they be elected.

Joakim Skoglund, Equity Strategist at Handelsbanken Capital Markets, told Reuters: "We would take a bet that on the pro-bailout parties winning, so we are not expecting Greece to leave the eurozone in the next couple of months."

How to Trade European Markets

With City Index, you can take a position on the future price movements of over 12,000 financial instruments with a financial spread betting account.

Financial spread betting is both a derivative and a leveraged product with the added benefit that trades are currently free from UK Stamp Duty* and all gains are also free from UK Capital Gains Tax*.

As a leveraged product, trades require an initial deposit of only a fraction of the underlying instrument's value. This means that in comparison to your initial investment, gains are magnified. But leverage is a double edged sword, with losses magnified in exactly the same way.

Trading Example: French CAC 40

On Monday morning, following the positive news out of Greece; the French CAC 40 rose 0.67 percent to trade at a price of 3068.21 (10:50 BST).

For example purposes only, let us say that at 9:00 BST through the City Index spread betting platform, the France 40 DFT (which represents the underlying financial instrument, French CAC 40) was available to trade at a spread of 3058/3059.

For investors who decided to trade on the positive news out of Greece and go long and buy - they would have done so at 3059. In this example, let us say they did so for a stake of £20.

When the market rose to 3067.5, an investor may have decided to take his/her's profits by selling back at the new spread. In this example, let us say that was 3067/3068.

Therefore, they bought the France 40 DFT at 3059 and sold at 3067 - an 8-point difference - netting them a tax-free* profit of £160.

Read more Free Spread Betting Articles

You can read more free spread betting articles such as this one through spread betting, CFD and FX trading provider City Index.

*Spread betting is exempt from UK stamp duty and Capital Gains Tax. However, tax laws are subject to change and depend on individual circumstances. Please seek independent advice if necessary.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFD trading and, in the UK, financial spread betting.

SOURCE City Index