Spread Trading April
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Weekly Online Spread Bet Comment, update 14 Apr 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 equity market elastic finally snapped, or more accurately was cut by a pair of General Electric scissors. For much of the week, equities ignored worsening economic and corporate data and a gloomy outlook from the International Monetary Fund. Confidence numbers in the UK and US hit record lows and HBOS announced that UK house prices fell by 2.5% last month.
But, after a couple of false starts, US shares finally succumbed to a ‘shocking’ earnings report from General Electric. The Dow fell by 200 points on Friday, dragging European markets in its wake.
There were no surprises on the interest rate front; UK rates fell by 0.25% to 5% and European rates remained unchanged at 4%. Money market rates remained well above base rates, reflecting continued nervousness in the banking sector. The cut in UK rates was greeted by several banks raising their fixed rate mortgages.
Equities finished the week lower with FTSE 100 -1% and the Dax, Dow and S&P all down around 2.5%. Asia's earlier close meant that the Nikkei and Hang Seng closed a bit higher, but we expect them to open weaker on Monday.
Equities Spread Bets
The US giant, General Electric, grabbed the headlines announcing its worst quarter in 5 years and cutting its full year forecast. Earlier in the week, Alcoa, AMD and UPS all warned of lower earnings in the US. In the UK, FTSE newcomer, Eurasian Natural Resources, posted record figures and Mitchells & Butler beat expectations with an upbeat trading statement. British Energy made daily news with more declarations of interest from European power companies. As UK banks raised their mortgage rates, HSBC played Father Christmas by offering to take over some mortgages at their current rates.
Forex Spread Bets
The Euro rose to record highs against Sterling and the Dollar. Although interest rate moves were as expected, the economic slowdown in the US and UK continued to worsen more than in Germany and France. Comments from the European Central Bank prompted speculation of future central bank intervention in the forex markets. The Euro ended the week at $1.5820 against the Dollar and £0.802 verses Sterling. Sterling fell by 1% against the Dollar to finish at $1.9720.
Gold Spread Bets - Crude Oil Spread Bets
Gold had a quiet week, ending $17 higher at $922.
Crude Oil hit a new high after a drop in inventories and news that OPEC has sneakily cut production. The Energy Information Administration warned that the oil market was tight and that prices would average over $100 a barrel this year. Brent Crude finished the week at $107.85, a rise of $3.
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Spread Bets - Economic Indicators and Company Results
Week Commencing 14 Apr 08
Bring your money to the table and start placing your bets; what a week we've got in store. There's bags of economic numbers, including retail sales in the UK and US and inflation numbers across Europe, the UK and the US. On top of that, the US reporting season picks up steam with earnings from Citigroup, Merrill Lynch and JP Morgan in the banking sector. In addition, we're expecting numbers from industrial heavyweights Intel, AMD, Caterpillar, Honeywell and Schering-Plough. Across in Europe, Phillips, Nokia and Drax Group report; an update on the retail sector is provided by Tescos, Debenhams, WH Smith and JJB Sports.
Don't forget, FTSE options expire on Friday morning; that may cause some extra volatility in the markets.
Monday
Economic Indicators
UK: 09.30 Producer Prices
EU: 10.00 Industrial Production
US: 13.30 Retail Sales, 15.00 Business Inventories
Results
UK: Armour Group interims, Sage Group trading update
EU: Groupe Danone, Phillips Electronics
US: Wachovia
Tuesday
Economic Indicators
UK: 00.01 BRC Retail Sales and RIC House Prices, 09.30 CPI
EU: 07.45 French CPI, 10.00 German ZEW Survey
US: 13.30 Producer Prices and Empire Manufacturing, 14.00 TIC Capital Inflows, 18.00 NAHB Housing Index
Results
UK: Hilton Food, SSL International, Tesco, Universe Group finals, Burberry and Carphone Warehouse trading updates
US: CSX, Intel, Johnson & Johnson, State Street, US Bancorp and Washington Mutual
Wednesday
Economic Indicators
UK: 09.30 Unemployment and Average Earnings
EU: 07.00 German CPI, 10.00 EU CPI
US: 13.30 CPI, Housing Starts, 14.15 Industrial Production, 15.30 Oil Inventories, 19.00 Beige Book
Results
UK: JJB Sport and Manganese Bronze finals, Charteris interims, Experian, RTZ, SAB Miller, WS Atkins trading updates, Legal & General new business
EU: Deutsche Lufthansa, LVMH
US: Abbott Labs, Coca Cola, eBay, IBM, JP Morgan, SLM Corp, Wells Fargo
Thursday
Economic Indicators
IRE: 11.00 Retail Sales
EU: 09.00 ECB Monthly Report, 10.00 Trade Balance
US: 13.30 Weekly Jobless, 15.00 Philadelphia Fed and Leading Indicators
Results
UK: Harvey Nash finals, WH Smith interims, Dart Group, Drax Group, Reed Elsevier, Victoria trading updates, Prudential new business
EU: Nokia, Roche
US: AMD, Baxter Int, Capital One, Google, Harley Davidson, Mellon Bank, Merrill Lynch, Pfizer and United Technologies
Friday
Economic Indicators
UK: 09.30 Money Supply and Government Borrowing
EU: 07.00 German Producer Prices, 10.00 EU Construction
Results
US: Caterpillar, CitiGroup, Honeywell, Schering Plough, Schlumberger
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The Financial Press, what the papers said:
Last update: 14 Apr 08
British Energy is the girl everyone wants to date. The Sunday Telegraph reports that Swedish giant, Vattenfall, is the latest to give British Energy the eye. The Scotland On Sunday reports that Iberdrola is close to declaring whether it will join the party, probably making an announcement at Tuesday's annual meeting. German utility company RWE is the only firm to have tabled an offer, at around 700p a share, but this one looks set to run and run.
The phoney war between JC Flowers and Friends Provident continues. Shortly after Flowers threatened to walk away, one of the biggest shareholders in Friends has called for talks between the two rivals. This suggests that although an offer of 150p a share is too low it's not far off.
In another big week for the banks, the Sunday Times whets the appetite with expectations of a further $15 billion of write downs. As well as reports from Citigroup, Merrills and JP Morgan, expect news of Deutsche Bank selling a debt portfolio to private equity firms.
As if the banks haven't got enough problems; the Sunday Telegraph reveals that this week UK prime minister Gordon Brown will be having a chat with senior banking figures. The same article expects Bradford & Bingley to launch a rights issue to bolster its balance sheet.
The Independent expects Tescos to disappoint investors when it reports on Tuesday. The paper expects falling sales on the clothing range to lead to job losses.
The Sunday Business Post brings further gloomy news the other side of the Irish Sea. It reports a 60% rise in the number of Irish firms going belly up in the first quarter of 2008.
On a brighter note, the Sunday Times reports on a return of confidence to the bond markets. Governments and banks raised almost £26.5 billion last week in European bond markets as investors' appetite for risk started to return.
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"Spread Trading April" written by paddy powe, last updated 14-Apr-2008
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Net moves on the week saw the Dax unchanged, FTSE -0.5%, Dow -1.5%, S&P -1.2% and Nikkei -1.8%. Financial firms across the market saw massive falls as US stalwart Freddie Mac warned that it would need to raise capital, possibly by slashing its dividend. In the forex market, the EUR USD cross briefly reached a new high of...read.
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Across markets the falls ranged from a barely changed Dax ?0.5% to the harder hit Asian markets with the Nikkei and Hang Seng falling by 5.5%. The FTSE and S&P fell by around 3.5% with the Dow faring worse at ?4.1%. Financials dominated the news flow with Wachovia declaring a $1.1 billion sub-prime related loss for October alone and Barclays denying further rumours...read.
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Once again the week ended with record highs in oil, gold and EUR/USD as sub-prime jitters returned to take the gloss off the equity markets. The Hong Kong and Indian exchanges reached new highs at the start of the week, but equities finished on a low note with FTSE ?2.0%, Dow ?1.5%, S&P ?1.7% and Dax ?0.3%. The Nikkei held up better at +0.1%....read.
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After a strong finish to equity markets on Friday, attention will return to the effects of the credit crunch, with the banks' reluctance to lend to one another causing money rates to continue rising. The European Central Bank has pledged to inject emergency funds into the money markets, until the end of the year if...read.
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Just a week after record highs in equity markets investors decided to celebrate the anniversary of the stock market crash of 1987 by knocking 360 points off the Dow on Friday. Rising oil prices, some shocking company results and further concerns over a slump in both the US and UK housing markets sent traders...read.
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