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Stock market sentiment more balanced as traders favour slumping Nikkei over FTSE

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Sentiment on the direction of indices was more balanced in May as 42 per cent of clients took a long position compared to 28 per cent a month ago, according to CMC Markets.

 
Indices are proving popular with a third more trades placed by CMC Markets’ clients than a month ago.
 
Confidence in the FTSE100 is low with 68 per cent of clients expecting further falls, following the index previously hitting close to all-time highs earlier in May.
 
Despite the Nikkei falling seven per cent in a single session in May, by the end of the month, 81 per cent of clients were taking a bullish stance. A further, 87 per cent of traders were also going long on the NASDAQ in May and 85 per cent doing the same on the CAC40.
 
The dollar proved popular among bullish traders with 66 per cent going long against the Japanese yen, anticipating a further devaluation of the currency.
 
Sentiment towards stocks remained consistent over the last month as 84 per cent of equity clients take long positions, up 1 per cent from April.
 
Treasuries were once again the most bearish of the asset classes with 87 per cent of our clients’ money going short by the end of the month.
 
Matt Basi, head of UK sales trading at CMC Markets, says: “The recent market pull-back has seen a shift in client sentiment with regard to indices – from being big sellers of the major markets, our clients are now taking a more balanced view as people manage their way out of previously painful short positions, and new bulls enter the market.
 
“While clients remain bearish on the prospects of the FTSE, the Japanese market is drawing interest from bullish traders following its slump. Clients have also bought into trades of the dollar against the Japanese yen, expecting a resumption of the upwards trend in both markets in the medium term.
 
“Another interesting feature of current trade is that clients are long Brent and short West Texas crude oil. Previously when the spread between the two contracts was >USD20 this was the other way around, but with the spread now hovering around USD10 our clients seem to think it will widen out again.”

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