Spread Trading Market Update
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Weekly Online Spread Bet Comment, update 24 Mar 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 week began with JP Morgan offering to buy Bear Stearns for $240million and the US Fed announcing further measures targeted at the US banking sector. Initially this caused panic, rather than relief, in the markets. The FTSE 100 closed at its lowest level since last August and the Dax hit a 52-week low.
Central banks flooded the market with extra liquidity in an attempt to stabilize share prices amid a spate of margin calls on leveraged investments. Fears of further bad news from US banks were unfounded as Goldmans, Lehmans and Morgan Stanley all produced better than expected results. This gave the markets a boost, and a 0.75% cut in US rates added to the momentum. US equities went into the Easter weekend on a positive note, showing 1-2% gains. The FTSE and Dax both fell by around 3% and the Nikkei by 1.4%. Part of this disparity was due to markets closing at different times.
In the UK hopes of a cut in interest rates rose following publication of minutes from the last meeting of the Monetary Policy Committee. However, these hopes were dampened by strong retail sales numbers.
Equities Spread Bets
In the banking sector Goldmans, Lehmans and Morgan Stanley all provided results which, although poor, were better than the markets expected. Shares in Fannie Mae and Freddie Mac soared as a change in ruling allowed them to invest billions in the mortgage market. HBOS survived an ugly rumour, and an 18% drop in the share price; a move which prompted the FSA to announce an investigation into dodgy dealings. Siemens hit an 18-year low after announcing a cut in quarterly earnings and Wolseley reported a 25% drop in profits and warned of an uncertain outlook. The NHS caused Legal & General to miss estimates; people living longer affected the projections on their annuity business. The CEO of Next saw no recovery in 2008 but, despite the turmoil, Visa raised a record $18 billion through a new issue.
Forex Spread Bets
The Dollar fell to new lows at the start of the week, but rallied on Thursday. This was largely due to a sell-off in commodities, which have an inverse relationship to the Dollar. The Dollar ended the week at $1.542 to the Euro and $1.9820 against Sterling. Against the Yen the Dollar recovered from Monday's 12-year low of Y95.77 to finish at Y98.63. Concerns over the banking sector, and hopes of lower rates, led Sterling to fall to an 11-year low against a basket of currencies (known as the £ Trade Weighted Index), including a new low of £0.7912 against the Euro.
Gold Spread Bets - Crude Oil Spread Bets
Risk aversion trades led to further record highs in commodities; gold hit $1,030 and crude oil made $111.80 on Monday. However, commodities suffered a wicked reversal on Wednesday with gold suffering its biggest 1-day fall in 18 years. There didn't appear to be one single explanation for this move, more a combination of reasons. Funds were rumoured to be locking in profits, preferring cash ahead of the Easter holiday. Also hedge funds were thought to be raising cash for higher margin calls by closing profitable trades. The Gold spread betting market ended the week at $923, down $76, and Brent Crude Oil at $100.38, down $7.
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Spread Bets - Economic Indicators and Company Results
Week Commencing 24 Mar 08
The main feature of the shortened week is a matter of confidence. There's a whole tool box of sentiment measures, reporting on how businesses and consumers are feeling around the world. We reckon it's unlikely these numbers will be good, but the key will be whether they're better than the market is expecting after recent events. There'll also be another stab at Q4 GDP numbers in the US and UK, and a smattering of housing data. Watch out for further central bank announcements of help to the banks and/or mortgage market. On Wednesday, members of the Bank of England will be tested on their recent Inflation Report by members of the Treasury Select Committee. Corporate earnings are due from Sainsbury, Kingfisher, Independent News & Media and Deutshe Bank.
Monday
Economic Indicators
n/a
Results
n/a
Tuesday
Economic Indicators
US: 14.00 Consumer Confidence
Results
UK: Standard Life finals, GCap Media, Pennon and Wincanton trading updates
US: Fortress Investments
Wednesday
Economic Indicators
EU: 07.45 French INSEE Business Sentiment, 09.00 German IFO Business Climate, 10.00 EU Industrial Orders
US: 12.30 Durable Goods, 14.00 New Home Sales, 14.30 Oil Inventories
Results
UK: Bellway interims, Sainsbury, Scottish & Southern Energy, Topps Tiles and United Utilities trading updates
EU: Deutsche Bank, Hochtief
US: Oracle
Thursday
Economic Indicators
UK: 09.30 Business Investment, BBA Mortgage Approvals, 11.00 CBI Distributive Trade Sales
EU: 07.10 German GFK Consumer Confidence
US: 12.30 Q4 GDP, Weekly Jobless, Help Wanted
Results
UK: Kingfisher, Moss Brothers and Skyepharma finals, Clinton Cards and Land of Leather interims, 3I, Compass, Firstgroup, LSE, Man Group, National Grid and Northern Foods trading statements
IRE: Independent News & Media finals
EU: Hugo Boss, Hypo Real Estate, IKB and Loewe
US: Apollo, Global Payments and Lennar Group
Friday
Economic Indicators
UK: 07.00 Nationwide House Prices, 09.30 Q4 GDP
EU: 07.45 Consumer Confidence
US: 12.30 Personal Income & Spending, PCE Price Index, 14.00 University of Michigan Consumer Confidence
Results
UK: Euromoney and Jessops trading updates
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The Financial Press, what the papers said:
Last update: 24 Mar 08
Once again, the banking sector dominates, with a good news/ bad news split. The Sunday Times kicks off, reporting on last Thursday’s consultation meeting between the Bank of England and the commercial banks. Despite no firm commitments there’s a feeling that the Bank will provide additional support, much in the manner of the US Federal Reserve.
Continuing with the positive news the Independent reports on the sovereign wealth funds. Rather than nursing their losses, several funds have said they’ll use the current market volatility to add to purchases in the banking sector. One leading financier said that he was investing on a 25-year view.
Easter Monday brought breaking news about a possible increase in JP Morgan’s bid for Bear Stearns. The Telegraph, amongst others, reports that JP Morgan is discussing the possibility of offering $10 a share to appease angry shareholders.
On the downside, Bradford & Bingley suffered a drop in one of its credit ratings. The Sunday Times reports that Moodys has cut one of its ratings, with a warning that there may be further downgrades to come. This cut in ratings suggests that there’s a growing likelihood that B&B might need help from the Bank of England.
In the corporate sector, the Sunday Times reveals bid interest in British Energy. Centrica is examining a £10 billion bid to keep the ‘British’ in British Energy. However, the paper suggests it’ll have a tough time bidding against likely rivals EDF, RWE and Iberdrola.
A very short piece in the Scotland On Sunday is expecting Kingfisher to slash its dividend by up to 50% this week. The results, due out on Thursday, are likely to show an £11 million drop in profits for the year.
Traders with a long position in Reed Elsevier had better read this. According to the Independent, private equity firm Apax seems to be losing interest in bidding for subsidiary Reed Business Information. It’s thought that Apax is busy enough sorting out their recent purchase of Emap Communications to look for more work.
Poor old Mike Ashley; the proud owner of soccer wannabees, Newcastle United, has scored an own goal on the stock markets. According to the Telegraph he backed HBOS in a serious way, late last year, and is now nursing a multi-million pound loss on the bet.
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"Spread Trading Market Update" written by paddy powe, last updated 24-Mar-2008
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