Online Spread Bet July 2008
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Weekly Online Spread Bet Comment, update 7 Jul 08
Part 1 - Trading News - Last Week's Markets
Part 2 - Economic Indicators and Company Results
Part 3 - The Financial Press, what the papers said
Trading News - Last Week's Markets
The nightmare on Wall Street continued as the Dow officially became a bear market, defined as a fall of 20% from the peak. The FTSE 100 has so far survived official recognition with a fall of only 19.6%, but both the FTSE 250 and Smaller Companies indexes are now 20% below year-end levels. Inflation fears sent investors fleeing to the safety of oil and gold as Eurozone CPI hit 4% (that's double the official target rate). Commodities were given a further boost as tensions between Israel and Iran increased. As expected, the European Central Bank raised rates by 0.25% to 4.25%. However, the subsequent press conference played down the threat of further rises, cancelling out the Euro's earlier gains.
For once, the biggest shocks were not from the banking sector; Taylor Wimpey failed to raise its expected £500 million of new money, Marks & Sparks hit the market with a surprise profit warning and Merrills reckoned that General Motors would need to raise $15 billion to survive.
With their market closed for Independence Day the US indices fared better than the rest of the world. The Dow and S&P fell by 0.5% and 1.2% respectively, compared to falls of 2.3% on the FTSE and Nikkei, and 2.1% on the Dax. Emerging markets bore the brunt of the selling with falls of 4-6%.
Equities Spread Bets
For once the news was not dominated by banking disasters. They were still there, but were outshone. The foundations of Taylor Wimpey's much heralded capital raising collapsed as the company conceded that current market conditions had made it impossible. Marks & Sparks stunned the market with a surprise profit warning and shares in Trinity Mirror fell 28% when it combined a profit warning with hints of a dividend cut.
In the 'good news' camp, AMEC edged up its earnings forecast, HMV met its expected 25% rise in profits and home shopping group N Brown said sales had accelerated and they expected more of the same in the months ahead.
The usual spate of write-down talk this week featured UBS and Deutsche Bank, and shares in Bradford & Bingley plummeted on news that TPG had abandoned its plans of a capital injection. Barclays and HBOS both fell below the price at which the new 'cheap' rights issue shares are being offered.
Forex Spread Bets
The Euro had looked set to test the previous $1.60 high against the Dollar as traders looked forward to Thursday's decision on interest rates. In the event, European rates rose as expected, but the message from the press conference was far more balanced than recent comments. This, together with the US payroll numbers being no worse than feared, cleared out some of the bullish positions in EUR USD. The Euro finished the week barely changed at EUR USD 1.57 and EUR GBP £0.792. Sterling followed a similar pattern, sticking its nose briefly above $2 before ending the week lower at $1.9820.
Gold Spread Bets - Crude Oil Spread Bets
Tension in the Middle-East pushed oil to yet another record high. A story doing the rounds that the Pentagon expected an Israeli attack on Iran set the Crude Oil ball rolling. Then a surprise fall in US stockpiles of Crude Oil gave it a further push to a new high of $146.69. Dollar strength on Thursday took the edge off, leaving Brent Crude $4 higher on the week at $144.42.
Gold continued to benefit from its 'safe-haven' status in a nervous and uncertain world. However, it failed to break through resistance at $950 and returned to $932.50, a gain of $7 on last week's close.
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Spread Bets - Economic Indicators and Company Results
Week Commencing 7 Jul 08
Monday
Economic Indicators
UK: 09.30 Industrial & Manufacturing Production
EU: 09.30 Sentix Investor Confidence, 11.00 German Industrial Production
Results
UK: Michael Page interims, Morgan Crucible trading update, Easyjet traffic figures
EU: BMW
Tuesday
Economic Indicators
UK: 00.01 NIESR estimate of June GDP, 09.30 DCLG House Prices
US: 15.00 Pending Home Sales, Wholesale Inventories, 20.00 Consumer Credit
Results
UK: THB finals, Big Yellow Group interims, PartyGaming, Persimmon trading updates
IRE: Bank of Ireland trading update and AGM
US: Alcoa, Pepsi Bottling
Wednesday
Economic Indicators
UK: 00.01 Nationwide Consumer Confidence, 09.30 Trade Balance, 10.30 BRC Shop Price Index
EU: 07.00 German Trade Balance, 07.45 French Trade Balance, 10.00 EU Q1 GDP
US: 15.35 Weekly Crude Oil Inventories
Results
UK: Avocet Mining finals, St. Modwen Properties interims, Interserve, Marks & Spencer, Microgen, Premier Foods and Tullow Oil trading updates
EU: Carrefour, Deutsche Lufthansa
Thursday
Economic Indicators
UK: 12.00 Bank of England interest rate decision
IRE: 11.00 CPI and Industrial Production
EU: 07.45 French Industrial & Manufacturing Production, 09.00 ECB Monthly Report
US: 13.30 Weekly Jobless
Results
UK: Anite finals, Associated British Foods, Computacentre, Experian, First Group, Hays, Johnson Service, Macfarlane, Psion, Xaar trading updates
US: Chevron, Marriott International
Friday
Economic Indicators
EU: 07.00 German Wholesale Price Index
US: 13.30 Trade Balance, 15.00 University of Michigan Consumer Confidence
Results
IRE: Norkom AGM
US: General Electric
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The Financial Press, what the papers said:
Last update: 7 Jul 08
The Telegraph is expecting Barratt Developments to announce a £100 million write-down of its landbank this week. But on a more positive note Barratt’s should announce an agreed waiver of its banking covenants. The paper understands that Barratts is close to completing a re-financing agreement on a £600 million loan, used last year to buy Wilson Bowden. For a bit more flavour on woes in the housebuilding sector have a quick look at the Scotland on Sunday, who appear to have more detail on the re-financing plus a preview of results this week from Persimmon.
The institutions offering to bail out Bradford & Bingley still want Clive Cowdery to be involved. The Independent reveals that Cowdery has been approached, but can’t get involved until after the rights issue ‘for legal reasons’. But I guess that’s the price the institutions demanded for stumping up the cash, and it’s only a matter of time before the current boss spends a bit more time with his family.
The Sunday Business Post breaks the news that Energia, Ireland’s largest independent energy company, is to be offered for sale. The current owners, Bahrain based Arcapita, are looking to raise between €1-1.5 billion from the sale.
With inflation fears dominating, the Telegraph has a good read for Gold bugs out there. The article reckons that gold has been left at the starting blocks in the commodity sprint and that it’s due a proper run. The price of gold relative to oil is at its lowest level for years and, according to the paper, with some central banks turning buyers the shiny stuff looks a good bet.
Looking ahead to Thursday’s interest rate decision in the UK, the Sunday Times’ pretend Monetary Policy Committee vote for no change in rates. The ‘Peter Crouch length’ list of sectors in trouble should persuade the Bank to gamble on inflation rather than the drowning economy.
Perennial take-over target Minerva looks to have broken-up with potential suitor Limitless. The Telegraph reports that since the Dubai property arm, Limitless, made an indicative offer in June it’s all gone eerily quiet. Minerva had presented to the bidding company, also hinting that the offer wasn’t high enough, but the current share price of just 72p suggests little faith in the offer proceeding.
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"Online Spread Bet July 2008" written by paddy power trader, last updated 07-Jul-2008
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