Spread Bets July 2008
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Weekly Online Spread Bet Comment, update 14 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
A cocktail of heightened tension in the Middle-East and a step closer to financial meltdown in the US consolidated the bear market in equities. Crude Oil rose to a new record high and gold broke above $950 for the first time since March. The US Dollar and Sterling both fell against the Euro as their economies looked to be weakening at a faster rate.
The week was dominated by US mortgage agencies Fannie Mae and Freddie Mac. Monday's rally in equities was turned on its head by news that government regulations could force the two agencies to raise a staggering $75 billion in capital. By Friday the position had escalated to the extent that a government bail out was being discussed. At least by traders. The nervousness was compounded first by talk of an Israeli dress rehearsal in Iraq, then by news that Iran had tested long-range missiles.
The FTSE 100 and S&P 500 officially joined others in the bear market camp. The FTSE closed down 2.8% at 5261, the Dax -1.9% at 6153. In the US the S&P closed -1.9% at 1239 and the Dow -1.7% at 11100, after dropping below 11000 earlier in the day. In the Far East the Nikkei fell 1.5% to 13039, but the Hang Seng had other ideas, rising 3.6% on the week.
Equities Spread Bets
Predictably dour reports from the UK building sector saw Bovis, Redrow and Barratt slash their workforces; Bovis and Barratt did the same to their dividends. But on the plus side Barratts confirmed that they had re-negotiated their banking covenants. Sports Direct limped off with a 51% fall in profits, saying conditions were the hardest ever faced, and C&C said that the continuing slump in cider sales would drag their first-half results below last year's.
There were pockets of good news though. Tullow Oil expect substantially higher first-half profits, AB Foods (owners of Primark and Pennys) showed a 24% rise in quarterly sales and Wal Mart raised its earnings outlook. Alcoa and General Electric earnings were OK, though the latter guided future earnings lower.
In the world of finance Bank of Ireland was hurt by stories suggesting it was reigning in its lending, and US mortgage bank IndyMac revealed depositors had been withdrawing funds at 'elevated levels'.
Forex Spread Bets
The US Dollar weakened on further evidence that the credit crisis was far from over. As the market swapped rumours on whether or not the US government would bail out Fannie and Freddie, the EUR USD rate rose to $1.5930. The Euro also gained against Sterling, pushing ahead to £0.80 as falling UK house prices highlighted the need for eventual cuts in UK rates.
Gold Spread Bets - Crude Oil Spread Bets
This week saw the biggest two-day fall in Crude Oil prices since mid-March, but the week ended with prices hitting yet another record high. Posturing in the Middle-East intensified with the Israelis practising air strikes in Iraq, and Iran testing long-range missiles. Unrest in Brazil and Nigeria increased the likelihood of further disruptions to supply. Brent Crude hit a new record high of $147.50, but ended the week unchanged at $144.49.
Gold, the prime beneficiary of geopolitical unrest and financial instability, soared $31 over the week to $963.80. Friday's moves saw the king of bling break, and remain above, resistance at $950.
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Spread Bets - Economic Indicators and Company Results
Week Commencing 14 Jul 08
Come on down for the latest game of "Which Price is Right?" Our trading screens are already moist with anticipation. Friday's Fannie/ Freddie cliffhanger will guarantee a nervous open to markets, with futures suggesting a slightly higher open. This week sees the release of producer prices and main inflation data for the US, UK and Europe; there's also key US retail sales and UK employment numbers.
There's a pick up in the US earnings season and check out some of the giants reporting this week. From IT there is, eBay, Google, IBM, Intel and Microsoft. And from banking are is Citigroup, JP Morgan, Merrills and Washington Mutual.
Closer to home sees updates from Land securities, RTZ, Wolseley and in M&T Bank (in which AIB holds a 24% stake). Minutes from the recent Fed meeting are released on Wednesday and Bernanke makes his semi-annual speech to the Senate on Tuesday.
Don't forget FTSE option expiry on Friday morning; this may cause some extra volatility in the market.
Monday
Economic Indicators
UK: 09.30 Producer Prices
EU: 10.00 Industrial Production
Results
UK: Low & Bonar, St Modwen Properties interims
EU: Phillips
US: M&T Bank Quarterlies
Tuesday
Economic Indicators
UK: 00.01 RICS House Price Survey, 09.30 CPI, 10.00 BRC Sales
IRE: 11.00 Retail Sales
EU: 10.00 German ZEW Survey
US: 13.30 Retail Sales, Empire State Manufacturing and Producer Prices, 15.00 Business Inventories, Bernanke Testimony to Senate
Results
UK: Burberry, Premier Foods trading updates, British Airways AGM
US: CSX, Intel, Johnson & Johnson, State Street Bank, US Bancorp
Wednesday
Economic Indicators
UK: 09.30 Unemployment & Average Earnings
EU: 07.00 German CPI, 10.00 EU CPI
US: 13.30 CPI, 14.00 TIC Capital Inflows, 14.15 Industrial Production & Capacity Utilisation, 15.00 Bernanke Testimony to House, 15.30 Weekly Crude Oil Inventories, 18.00 NAHB House Index, 19.00 minutes from the latest Fed meeting
Results
UK: JD Wetherspoon, Land Securities, RTZ, Wolseley trading updates, BT AGM
EU: Alstom
US: Abbott Labs, eBay, Washington Mutual, Wells Fargo
Thursday
Economic Indicators
EU: 10.00 Construction Orders
US: 13.30 Housing Starts & Building Permits, Weekly Jobless, 15.00 Philadelphia Fed Index
Results
UK: Ashmore, Blacks Leisure, Cable & Wireless, Hilton Food, Smiths News, Tribal trading updates. Land Securities AGM
IRE: Zamano AGM
EU: L'Oreal, Nokia, Novartis
US: Advance Micro Devices, Bank of New York, Baxter International, Capital One, Coca Cola, Google, IBM, Illinois Tool Works, JP Morgan, Merrill Lynch, Microsoft, United Technologies
Friday
Economic Indicators
UK: 09.30 Money Supply and Government Borrowing
IRE: 11.00 Construction Employment
EU: 07.00 German Producer Prices, 10.00 EU Trade Balance
Results
UK: Anite finals, Electrocomponents, Flying Brands trading updates, ICAP, Invensys AGM
IRE: DCC AGM
US: Citigroup, Honeywell, Schlumberger
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The Financial Press, what the papers said:
Last update: 14 Jul 08
The Sunday Times reports on plans being drawn up for a $15 billion cash injection into Fannie Mae and Freddie Mac. This is said to be one of several options being discussed by regulators as a means of restoring confidence to the firms.
Wolseley looks set to combine a profit warning with news of further job losses, according to the Telegraph. The same article discloses that last week Taylor Wimpey failed to persuade bankers in another attempt at re-financing.
Expect another nervous week for bank shares; the Observer reminds us that this is decision week for HBOS shareholders. With the share price below the rights issue price there’s little incentive to take the shares.
The Sunday Business Post runs a scare story that EU regulations could lead to less demand for Irish shares. Part of this is due to the 1% stamp duty, compared to 0.5% in the UK and zero in Europe. But the main claim is only based on a directive that makes other markets easier to deal in than before, so don’t take it too seriously.
The Telegraph reckons that a consortium of buyout firms might come up with a counter offer for Informa.
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"Spread Bets July 2008" written by paddy power trader, last updated 14-Jul-2008
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