June Spread Bets
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Weekly Online Spread Bet Comment, update 16 Jun 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
Never a dull moment in the markets. A week ago equities were crushed by a rise in the number of Americans without a job; this week the focus returned to rising inflation. Headline inflation in the US rose to 4.2%, though investors took comfort from the core rate remaining at 2.3%. French CPI rose to a 17-year high of 3.3% and even Japan, the land of deflation, saw prices rise at the fastest rate in 27 years.
Talk of yet more write-downs in the banking sector spooked the markets; the HBOS share price fell below the rights issue price, but recovered towards the end of the week. Rumours surrounded Lehmans on a daily basis and a news report suggested that some investment banks were exposed to an additional $10 billion of writedowns following the monolines' loss of AAA credit rating. Whilst Fed members talked the Dollar up, members of the European Central Bank backtracked on the threat of rate rises. The message was that only a single rise was discussed, not several rises. They needn't have bothered; Ireland's 'No' vote on the EU Treaty did for the Euro, seeing it fall to $1.5380.
The week ended with some crazy, mixed-up closes. At one end America, the cause of many of the week's problems, saw the S&P unchanged on the week and the Dow 0.8% higher. The Dax fell by 0.6% and FTSE, weighed down by banks, house builders and a high commodity weighting, fell by 1.8%. But Asia and the tiger economies were worst hit as the fear of higher inflation started to sink in. The Nikkei finished down 3.6% whilst the Hang Seng plunged 7.4%.
Equities Spread Bets
Banks on both sides of the Atlantic provided most of the excitement; Lehmans hit the headlines most days with talk of write-downs, capital raising and the departure of top management. In the UK, Royal Bank of Scotland breathed easier, announcing a 95% take-up of its rights issue. Focus turned on HBOS with shares being smashed below the price of the rights issue on Wednesday. However, a statement by the FSA that they'd be monitoring short selling of companies with rights issues gave HBOS a massive boost; shares rose by 14% following the announcement.
Barratt Development plunged 38% over the week on fears that failure to renegotiate bank financing would lead to a debt for equity swap.
There was no pleasing shareholders in Carphone Warehouse; investors ignored the rise in profits and 31% dividend increase and sold the shares down 12% on the company's cautious outlook.
British Energy rebuffed an offer by EDF who hinted that they may return with a higher bid price.
Belgium's InBev offered to introduce quality lager to America with a $46 billion bid for Anheuser Busch, makers of Budweiser.
Forex Spread Bets
For those slow to catch on, Ben Bernanke and his buddies from the Fed hammered home the point that they were now focused on fighting inflation. And this fight would be a whole lot easier with a stronger Dollar. Traders took the hint and pushed the greenback to its biggest weekly gain in 3 years. The Dollar gained 2.3% against the trade-weighted basket of currencies, finishing the week at GBP-USD $1.95 and USD-JPY ¥107.90.
The Euro was knocked for six by Ireland's 'No' vote on the European Treaty and ended the week at EUR-USD $1.5380 and EUR-GBP £0.789.
Gold Spread Bets - Crude Oil Spread Bets
There was more balance to the oil market this week, with prices bouncing around in a $130-138 trading range. The one-way bet seems to have faded, with the black gold reacting nervously to different pronouncements of over/under supply and demand from different organisations. There were various reports of Saudi Arabia either offering to increase production or set up a meeting of the major players, or both. Brent Crude dropped around $4 on the week, finishing at $134.25.
The stronger Dollar and lower oil price diminished Gold 's appeal as a hedge against inflation, sending the gold price $34 lower to $865.
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Spread Bets - Economic Indicators and Company Results
Week Commencing 16 Jun 08
In the run up to Friday's FTSE option expiry there's plenty to keep us occupied.
Once again inflation will be a key theme with European CPI on Monday, followed by inflation data for the UK on Tuesday. It's expected that UK inflation will be higher than the 3% ceiling. This will trigger Governor Mervyn King's letter to the Chancellor, explaining why inflation rose above the target during his watch. Meanwhile, US producer prices will highlight the ongoing cost pressures on industry.
There aren't many companies reporting but the few on offer from the US are packed with explosives. Be on high alert for investment banks Lehmans, Goldman Sachs and Morgan Stanley reporting on consecutive days. On Thursday Irish Life & Permanent issue their trading update.
In the forex market traders will be watching for further weakness in the Euro after Ireland's 2-fingered vote on the Treaty. Also, Wednesday sees the release of the minutes from the last MPC meeting when rates were held at 5%.
Monday
Economic Indicators
EU: 10.00 CPI
US: 13.30 Empire Manufacturing, 14.00 TIC Capital Inflows, 18.00 NAHB Housing Index
Results
US: Adobe Systems, Lehmans
Tuesday
Economic Indicators
UK: 09.30 CPI
EU: 10.00 Trade Balance, German ZEW Survey
US: 13.30 Producer Prices, Housing Starts and Building Permits, 14.15 Industrial Production and Capacity Utilisation
Results
UK: CML Microsystems and Halma finals, Domino Printing interims, Premier Farnell and Whitbread AGMs
US: Best Buy, Goldman Sachs
Wednesday
Economic Indicators
UK: 09.30 Bank of England minutes, 11.00 CBI Monthly Industrial Trends
EU: 10.00 Construction Output
US: 15.30 Weekly Crude Oil Inventories
Results
UK: Sainsbury Q1 trading statement
US: FedEx, Morgan Stanley
Thursday
Economic Indicators
UK: 09.30 Retail Sales, Government Borrowing and Money Supply
IRE: 11.00 Wholesale Prices
US: 13.30 Weekly Jobless, 15.00 Philadelphia Fed Index, Leading Indicators
Results
UK: Cadbury Schweppes, Centrica trading updates
IRE: Irish Life & Permanent trading statement
US: Carnival
Friday
Economic Indicators
EU: 07.00 German Producer Prices
Results
There are no company results today
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The Financial Press, what the papers said:
Last update: 16 Jun 08
The Sunday Times offers an explanation of how Barclays will avoid raising funds through a rights issue. The paper reckons talks are underway with Asian funds to provide £4 billion of capital through a share placing. The suggestion is that the offer will also be open to existing shareholders, but underwritten by the sovereign wealth funds.
Meanwhile Lloyds TSB, which got off lightly during the credit crisis, is looking to cast its net abroad. The Sunday Telegraph reveals an interest in Deutsche Postbank, an £8 billion German retail bank.
The Independent looks forward to this week’s earnings reports from the US banks. It expects further write-downs totalling £4.6 billion and possible news of a bidder, or further cash injection, for Lehmans.
Brazilian miner Vale is back in the news again, at least in the Observer. The company that cast more than an eye over Xstrata is reportedly building a war-chest to take on Anglo-American.
There could be some relief for leading house builders, according to the Telegraph. Plans are being drawn up for some large investment firms to invest directly in builders like Barratt Development and Taylor Wimpey, rather than see the share price destroyed by a rights issue.
If you’ve got 5 minutes and a cuppa the Independent provides a weighty, but worthwhile, read for all you Oil barons out there. The article looks forward to next weekend’s meeting of the who’s who in the oil world (and Gordon Brown) by painting an in-depth picture of the trouble with putting a price to the black stuff.
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"June Spread Bets" written by paddy powe, last updated 16-Jun-2008
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