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Thursday, July 31, 2008

BetOnMarkets Morning Update

The FTSE is currently indicating a sharply lower opening, while traders are awaiting the release of the Manufacturing Purchasing index. Analysts are expecting another decline this month, as the economy has been suffering from high energy prices and the squeeze from not being able to pass all the costs to the consumer. Look for the manufacturing sector to be trading in the red this morning.

Gold will be receiving plenty of attention this morning, especially at 14.30GMT when US releases its employment numbers, traders are expecting a seventh straight month of job losses, and if the unemployment rate comes out worse then expected look for gold to jump possibly hitting the 925 dollar mark before the end of the day.


Wednesday, July 30, 2008

BetOnMarkets Morning Update

The FTSE is currently indicating a higher opening, while traders are disseminating the worse then expected UK consumer confidence which came out while most traders were sleeping. The confidence index dropped to a record low in July, slipping below the level reached on the eve of the 1990 recession, as house prices slumped and inflation accelerated. We believe that traders believe that these figures will force the Bank of Englands hand and lower interest rates, which would be positive for the FTSE.

Oil found its footing yesterday as a surprise inventory number out of the US gave some traders reasons to believe that crude's slide was overblown and that the drop in gas supplies means prices have fallen enough to nudge Americans back onto the roads. While oil is trading at 126 dollars a barrel, it is still on the lower end of Julys trading range. We believe that oil prices will trade in a tight range until the US GDP figures come out, if the number is lower then expected, we can see oil prices fall below 120 dollars per barrel.


BetOnMarkets Afternoon Update

The large earnings miss from Lloyds TSB is getting most of the headlines today, but for all the “this is another Northern Rock!” warnings, Lloyds share price is still above the £2.70 low registered earlier in the month. RBS and Barclays are actually enjoying gains of around 4% today as investors cycle back into financials. There has been a lot of uncertainty over bank’s earnings from the likes of Merrill Lynch in the US to Lloyds TSB in the UK. Traders tend to hate uncertainty more than they hate bad news, and although the news from Merrill or Lloyds has been dire, at least market participants can now price in the bad news and start to be able to compute downside risk. This is much more preferable than the unknown and stocks often rise as a consequence.

The release of the news helps to foster the belief that the worst of the credit crunch is behind us, at least from the point of view of being able to estimate future earnings more accurately. The logic behind this can of course be questioned, but it is evident that investors are getting more confident in their bullish positions.

The better than expected US ADP employment report helped boost US markets earlier today as has the continued weakening the price of oil. It is debateable whether we have bottomed or not, but for now the bulls seem in control …… At least until the next big news item.


BetOnMarkets Morning Update

The FTSE is currently indicating a sharply higher opening, as traders are trying to get their positions in before the release of the UK consumer confidence numbers which are released at 11pm GMT tonight. There are rumours circulating that the number will be higher then expected. Traders are proving that the old saying buy on rumours sell on the news works. Look for the FTSE to stay in the green the whole day.

Gold and oil keep taking it on the chin as both were losers yesterday, oil is on the verge of heading below 120, technicals are indicating that a break of that level opens a move to 110. This could be helped with the employment data from the US which is due on Friday of this week. Gold is giving back all the gains made last week, as the US dollar strengthens against the major currencies especially the commodity pairs (Australian and Canadian dollar). Both have lost ground as gold fell from its 975$ peak. Look for the strength of the US dollar to continue unless economic data shows otherwise


Tuesday, July 29, 2008

BetOnMarkets Afternoon Update

Stocks are soaring as oil falls further towards $120 on speculation that a slowing global economy will check demand. It will be further bad news for hedge funds who recently endured their worse month for many years as the leveraged oil trades unwound with falling prices. Stalling oil prices are also not helping BP as it pulls back further from the days opening highs. The previous results were impressive, but a significant proportion of those profits come from their Russian joint venture which looks like it will be torn apart over the coming months.

Financials are a mixed bag today with Barclays and RBS falling heavily at the open and struggling to catch up. The US financial sector as whole isn’t having too bad a day despite Merrill Lynch’s write down and plans to raise capital. Merrill is being punished for releasing their announcement less than a fortnight after their earnings figures. Elsewhere the US house price collapse continues to accelerate. The S&P/Case-Schiller Index shows annual declines in prices of existing single family homes of 15.8%. With UK politicians discussing plans to help out mortgage lenders, they would be well served to use the US housing market as an advanced proxy of what could happen in the UK.


Monday, July 28, 2008

BetOnMarkets Morning Update

The FTSE is currently indicating a lower opening, as traders are awaiting the release of the UK lending data which will come out around 8.30am GMT. Analysts are expecting another month of contracting mortgage approvals and loan issues as financial institutions are tightening the lending qualification requirements after being burned by the current credit squeeze. Banks have been announcing write downs for 3 quarters totalling more then 250 billion dollars, and some suggest that this is not over just yet. Look for the FTSE financials to take it on the chin this morning if the lending numbers come out worse then expected.

Oil stood its ground yesterday, as traders are waiting to see if demand has returned with what is now called somewhat cheap oil prices. Crude has given up more then 20 dollars since it hit an all time high earlier this month, however oil prices are up more then 75% from its August 2007 prices. If on Wednesday we do not see the return of consumer demand it is very possible for oil prices to dip below 120 dollars per barrel. Gold which lost more then 50 dollars last week due to the strength of the US dollar, seems to be recovering as some experts are saying that the selloff was overdone. We expect for gold to keep creeping up possibly hitting 940 dollars per barrel before Fridays employment numbers out of the US.


BetOnMarkets Afternoon Update

As London swelters in the summer heat, the FTSE looks to have taken an early holiday this week on a tight ranging, low volume trading day. Most major indices are mixed to negative after a light weekend news flow. In the US two more banks were taken over by the FDIC, First National Bank of Nevada and First Heritage Bank, N.A., but this caused few ripples of excitement across global markets. It is a busy economic calendar this week, but much of the action happens in the latter half of the week with earnings from RBS and Barclays and US payroll figures on Friday. A modest rebound in commodities led by oil has put miners and energy stocks at the forefront, but momentum and volume is relatively weak across the board in either direction.


Economic calendar for week July 28th - August 1st 2008.

BetOnMarkets Weekly Briefing
Contents This Week:
Economic calendar for week July 28th - August 1st 2008.
Commentary: The week ahead.
Economic Calendar for week July 28th - August 1st 2008

PLEASE NOTE - All times GMT not BST. BST is +1 Hr.

Monday July 28th:

UK - Tentaive - Nationwide House Prices M/M.
GE - 06:00 - Consumer Confidence.
US - 16.00 - FOMC Member Mishkin Speaks.

Tuesday July 29th:

GE - Tentative - Prelim CPI M/M.
UK - 08:30 - Mortgage Approvals.
UK - 08:30 - Net Lending to Individuals M/M.
UK - 10:00 - CBI Distributive Trades Realised.
US - 13:00 - S&P/CaseSchiller HPI Composite-20.
US - 14:00 - Consumer Confidence Index.

Wednesday July 30th:

GE - 06:00 - German Retail Sales M/M.
EU - 09:00 - Consumer Confidence.
US - 12:15 - ADP Nonfarm Employment Change.
US - 14:35 - Crude Oil Inventories.
UK - 23:01 - GfK Consumer Confidence.

Thursday July 31st:

GE - 07:55 - Unemployment Change.
EU - 09:00 - CPI Flash Estimate Y/Y.
US - 12:30 - Advance GDP Q/Q.
US - 12:30 - Advance GDP Price Index Q/Q.
US - 12:30 - Employment Cost Index.
US - 13:45 - Unemployment Claims.
US - 13:45 - Chicago Business Barometer.

Friday August 1st:

EU - 08:00 - Manufacturing PMI.
UK - 08:30 - Manufacturing PMI.
US - 12:30 - Nonfarm Employment Change.
US - 12:30 - Unemployment Rate.
US - 12:30 - Average Hourly Earnings M/M.
US - 14:00 - ISM Manufacturing Index.
US - 14:00 - ISM Manufacturing Prices.
US - 14:00 - Construction Spending M/M.

EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

Markets endured a volatile week, finishing largely flat despite dramatic 2.5%+ falls on Thursday. In the UK, banking stocks managed to build on the shift in sentiment from last week, but US financials endured further bad news, with Wachovia bank posting a record loss. The beleaguered bank produced an eye watering loss of $8.9 billion for the quarter, slashed its dividend and announced thousands of job cuts. Fannie Mae and Freddie Mac reversed the gains from last week on fears of complications in the proposed bail out. There were mixed results from major US companies, with tech firms such as Amazon impressing and online DVD retailer Netflix continuing its good run of earnings reports. Apples disappointing figures caused some consternation early in the week, but the Ipod manufacturer wasnt beaten down for long. After opening the day down over $10, Apple recovered the opening losses and more, as sales of the new iphone look to be taking off.

Lower energy prices certainly helped ease the pressure on global markets last week. However, this easing has to be taken in the context of slowing demand from the US and China. Oil closed the week around $125, some $20 below its peak just few weeks ago. Natural gas has fallen even further than oil. Gas has dropped from above 13.50 to 9.737 in July alone, representing a huge 28% collapse. Other commodities have also fallen back in dramatic fashion with Corn and Wheat down at least 40% from their peak prices. Gold has dropped, but less than other commodities, falling 7% coming with $10 of $1000. These falls will be welcomed by governments and central bankers alike, but the real test for global economies, will be the lagging effect of spiraling wage demands.
At the centre of the storm, the US economy is also showing sides of further weakness, not recovery as many hoped at the beginning of this week. US initial jobless claims came in worse than expected and 95% of US metro areas experienced year on year increases in foreclosure activity. It is little wonder they are so bad with the average 30 year fixed mortgage in the US now at its highest level since 2002, despite the dramatic rate cuts from the fed earlier this year. Oil is hovering around the $125 mark, but that will be little comfort to Ford who registered an $8.7bn loss, as consumers shun their gas guzzling SUV heavy catalogue of vehicles. The buying from last week is looking increasingly like a suckers rally as traders realise that the worst may not be behind us, and may in fact may appear very soon in the future.

Next weeks first economic announcement of note is the US consumer Confidence Index. As has been the case with many announcements recently, it will be a question of how bad the figures are rather than how good. Wednesday brings US ADP Nonfarm Employment Change figures, followed by US GDP numbers on Thursday. The First Friday of the new month is always the heaviest with the arrival of US Non Farm Payroll figures.
With US Mortgage applications dropping 6.2% again recently, and profit warnings from Toyota and Ford, the US economy may not be out of the waters just yet. However, the Non Farm Payroll figure, or at least the reaction to them, has the potential to spring a surprise in either direction in the short term. Therefore a volatility trade may be the better option over the coming days. An Up or Down trade returns a profit if either of two levels are hit during the specified time period. An Up or Down trade on the Dow Jones (Wall Street) with the levels set as 11000 and 12000 could return 32% over the next 11 days.

BetOnMarkets Morning Update

The FTSE is currently indicating a slightly lower opening, as traders are waiting for the release of the UK Nationwide House prices. While analysts are already expecting house prices to fall another 1.1% last month, there are rumours circulating that there is a risk that the number will be much lower then expected. This would put a squeeze on home builders and financial institutions.
Gold halted its losses on Friday finishing the day near 930 dollars per ounce. Gold is rising on speculation the dollar will weaken against the euro, boosting the appeal of the precious metals as alternative investments. In fact some traders are saying that the US dollar rally is on it last legs. This should keep gold above 920 for the rest of the week. Oil is on the defence again, as OPEC increased its output, while consumers are decreasing their demand for this pricey commodity. There is potential for oil to fall below the 120 dollar level.


Thursday, July 24, 2008

BetOnMarkets Morning Update

The FTSE is currently indicating a sharply lower opening, as traders are worried that the GDP numbers which are released this morning will come out on the weaker end. A weak number would deal another blow to the BOE which has been fighting a war on two fronts, Inflation and a sluggish economy. The good news is that a weaker GDP might force the hand of the BOE to cut interest rates at the next meeting, which would be a positive move for the FTSE.

Commodities managed to regain some ground after negative news regarding the US new claims data, which showed more then 400,000 new layoffs last week, putting the breaks to the recent strength of the US dollar. Gold which printed a low of under 920 dollars per ounce, is now trading north of the 925 dollar mark. We anticipate that the precious metal will regain more ground today, possibly finishing the day above 935 dollars. Oil which has been the biggest loser this week, managed to stabilize near the 125 dollar per barrel mark, and is currently trading north of 126 dollars. The economic data out of the US should dictate whether the price of oil is going to attempt another shot at 150, or try and break below 120.


BetOnMarkets Afternoon Update

The FTSE stumbled out of the gate this morning and has been unable to recover throughout the day. The main catalyst in the UK market was UK retail sales coming in at below estimates. This is a further blow to the UK economy which is still reeling from implications of the shocking Vodafone numbers on Tuesday. At the centre of the storm, the US economy is also showing sides of further weakness, not recovery as many hoped at the beginning of this week. US initial jobless claims came in worse than expected and home sales were worse even than the dire projections from most economists. It is little wonder they are so bad with the average 30 year fixed mortgage in the US now at its highest level since 2002 despite the dramatic rate cuts from the fed earlier this year.

Oil is hovering around the $125 mark, but that will be little comfort to Ford who registered a $8.7bn loss as consumers shun their gas guzzling, SUV heavy catalogue of vehicles. The buying from last week is looking increasingly like a suckers rally as traders realise that the worst may not be behind us and may in fact may appear very soon in the future.


Wednesday, July 23, 2008

BetOnMarkets Morning Update

The FTSE is currently indicating a slightly lower opening, as traders are waiting for the release of the UK retail sales numbers. Recently the health of the consumers has come into question, with falling home prices and higher unemployment figures consumers are stuck between a rock and a hard place. We believe that the number will come in slightly weaker then expected, and result in weakness among the retail sector of the FTSE and a selloff in the GBP/USD.

Commodities suffered again last night, as the US dollar flexed its muscle yet again. Gold which started the week near the 970 level is now trading almost 50 dollars lower, and oil is below the 125 mark. This is all short lived, and we should see oil prices increase in the coming days. Expect oil prices near 130 before the end of the week. Gold, which is used to hedge the US dollar, might not see a return to recent highs for a while, but yesterdays sell off was way overdone, and a bounce back probably above 930 is in the cards


BetOnMarkets Morning Update

The FTSE is currently indicating a sharply higher opening as traders are hoping that the minutes from the last BOE meeting will show that there will not be a rate hike in the near future. Interest rate hikes hurt equities, and if the minutes come out dovish we see the FTSE possibly adding more then 100 points today.

Commodities were again on the losing side of things, mainly due to the strength of the US dollar. All the attention will be focused on oil, especially towards the end of the day, when the US Department of Energy will be releasing its inventory numbers. There is a risk that US consumers have been really cutting back on oil purchases, and if the inventory number is higher then expected, a selloff in the price of oil will follow.


Tuesday, July 22, 2008

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BetOnMarkets Morning Update

Even low oil prices are not helping the FTSE this morning, which is indicated sharply down. Some can be attributed to the increase in UK companies that are experiencing financial problems. With no economic news in UK until Wednesday, traders are back to buying on rumours and selling on the news. Watch for some traders to be squaring trades ahead of tomorrows BOE meeting minutes release.

Oil was quiet yesterday, and we are expecting the same this morning. This is mostly a technical analysis, as it seems like oil needs to consolidate here before trying to attempt another shot at the summit put in place last earlier this month. Gold is moving higher again, we are looking for 1,000 dollars per ounce before the Labour day.


Monday, July 21, 2008

BetOnMarkets Afternoon Update

Thanks primarily to the financial sector, stock markets around the world are building on the rally from the second half of last week. It is interesting to note that the stocks leading the rally are those that were beaten up the most as market’s plunged to their recent lows. In the UK, Barclays and RBS in particular are performing well today as sentiment reverses on the battered banking sector. After Bank of America’s earning’s came in better than expected, other US financials are pushing higher. Freddie Mac, Fannie Mae and Lehman Bothers have risen 74%, 89% and 46% respectively since the lows on the 15th of this month.

While this rebound was perhaps overdue, the case for further rallies of this magnitude is a little weaker. We will have more of a clue this evening with earnings announcements from American Express, Apple and Texas Instruments after the US closing bell.


Economic calendar for week 21st - 25th July 2008.

Markets endured another volatile week, with US markets had a better time of it than their European counterparts. There were some clear psychological levels in play last week, as markets fell to fresh multi year lows, before recovering in the second half of the week. The Dow hit 11,000 for the first time since July 2006, and the S&P 500 hit 1,200 for the first time since October 2005. The CAC came close to hitting 4,000 for the first time since May 2005, the Dax hit 6000 for the first time since October 2006, and the FTSE reached its lowest point for over three years.

Markets started the week in promising fashion. News of a bailout for embattled US Government sponsored banks Freddie Mac and Fannie Mae, hit the wires on Sunday, buoying the financial sector throughout Europe and the US. Alliance & Leicester also added cheer when Santander confirmed a takeover proposal, sending the shares up around 50% on the day. However, the sellers soon gained traction. A run on regional bank IndyMac Bancorp spurred its collapse over the previous weekend, and a takeover by the Federal Deposit Insurance Corporation. Both clients and speculators are pulling their money out of other regional banks, as panic spreads over the prospect of runs on other regional banks.

The FTSE 100 was still one of the worst performers of the main global indices last week. The problem for the UK benchmark index is that it has one of the heaviest weightings of financial and energy stocks of all the major stock markets. Oil stocks have come under pressure over the last couple of days and financial stocks endured a tortuous week. Financial stocks such as Barlcays and RBS were trampled on as investors fled out of banking stocks and equities in general. The RBS share price at one point fell below the level it was at around the time of the much trumpeted takeover of Natwest. At one stage RBS fell 50 pence below its rights issue and Barclays 40 pence below its share offering. Investors punished UK banks with the highest exposure to the US.

Towards the end of the week, financial stocks recovered strongly. Traders bought into the banks, believing they were pushed down too hard too fast. In the short term at least it looks as though investors are confident that banks have been beaten down well below fair value, and were stepping in to pick up some bargains. Better than expected earnings from JP Morgan, Coca Cola, and United Technologies helped fuel the Wednesday/ Thursday rally further. Fridays better than expected results from Citi Group helped counter balance some disappointing results from Merrill Lynch, Google, and Microsoft. The search giant Google saw Pay Per Click growth slow slightly, but stated that they were well positioned for a down turn, as consumers go online in search of bargains.
After the volatility of the last seven days, thankfully the coming week is much quieter in comparison. The first top tier announcement of note is BOE governor Mervyn King speaking in the morning on Tuesday, followed by FOMC member Plosser speaking around Midday. These speeches come ahead of the release of the minutes from the last FOMC meeting on Wednesday morning. UK rates policy is stuck between fighting inflation and helping the economy in difficult times. The minutes will be analysed extremely closely. Thursday brings UK retail sales, and US existing home sales. Friday is perhaps the busiest day of the week, with UK GDP figures, followed by US Core durable goods orders and new home sales in the afternoon.

Despite the late rally off technical lows of many indices, conditions are still fragile for the global economy. The US Housing Market Index fell to new lows for July, as the US housing collapse continues to show no signs of recovery. US CPI figures rose 9.2% year on year. Consumer prices surged the most since 1982, a time when interest rates were at 15.5%. Such inflation readings strongly counter the argument for a further rate cut from the US Government. The stagflation scenario seems to be taking one step closer to reality, as inflation rockets, and US retail sales growth slows to just 0.1%.
The UK is certainly not immune from this, with public sector workers striking over below inflation wage increases. Jim Rogers of the hedge fund Rogers Holdings is famous for accurately predicting that Gold would reach $1,000 and oil $100. He was less than sanguine about the state of the UK economy. He recently said The UK economy has the highest rate of inflation since 1986 He implied that the UK government had the tendency to massage the figures, so if they are admitting its bad You know its real bad.
Last weeks late recovery could be a useful point to enter trades predicting the sell off will continue. A No Touch trade predicting that the FTSE 100 wont touch 6200 at any time during the next 6 months could return 21%.


BetOnMarkets Morning Update - 21/07/08

The FTSE is currently indicating a flat opening, with traders analyzing what the disastrous HBOS offering means for the market sentiment. A few are worried that investors are getting smarter and are not just handing over their money to these struggling banks. We believe that as we get closer to the open, the FTSE will dip lower and open in negative territory.

Commodities got hammered last week as the US dollar showed some strength, especially with oil giving back more then 10% from its intraweek high. This morning oil is higher, indicating that the optimism of the US dollar strength was over done. We are looking for oil to be back north of 135 before the end of the week. Gold was actually a winner last week, and looks to continue its trip back to the peak its set early this year.


Thursday, July 17, 2008

BetOnMarkets Morning Update - 18/07/08

The FTSE is currently indicating a flat opening, with traders are weighing in cheaper oil versus another round of the credit crisis. Some investors are awaiting the release of the UK Public borrowing numbers. Traders will be able to see if the government is trying to improve the economy by increasing spending.

Oil is trading below 132 dollars per barrel, however the cheap oil seems to be short lived. Crude oil got a push higher when Nigeria had its oil production disrupted due to pressure failure. We think that oil will finish the week on a high note, probably just north of the 135 dollar level. Gold went through another beating yesterday, after a combination of the strong dollar and a rally in the US equities. We believe this is just a correction, and gold will rebound as US strength will wane in the coming days.


BetOnMarkets Afternoon Update

Bullish banks have lead the charge today as the relief rally continues. The day’s enthusiasm is primarily on the back of yesterday’s strong surge from US markets. The pressure has been on the UK banking sector, but they were pushed down too hard too fast. In the short term at least it looks as though investors are confident that banks have been beaten down well below fair value and are stepping in to pick up some bargains. Better than expected earnings from JP Morgan, Coca Cola and United Technologies helped fuel today’s rally further when the numbers came in around Midday. Stronger than expected housing starts and weekly jobless claims have also added to the positive news flow.

Markets are off their highs but are still registering solid gains as traders await the numbers from some Wall Street heavy weights after the US close. This evening we have Merrill Lynch, Google, Microsoft and IBM all announcing their latest earnings figures. If they come in better than expected, stocks could see some serious buying post market and at the open tomorrow morning.


BetOnMarkets Morning Update - 17/07/08

The FTSE is currently indicating a stronger opening, with HSBC leading the way. The HSBC stock is higher in Asian trade, after worries about the US financial system eased. Today with no economic data being released in UK, the focus will shift across the ocean, and focus on the housing start and weekly employment data from US.

Gold suffered a bout of profit taking yesterday, as traders booked profits after gold gained more then 50 dollars over the last week. Gold will resume its uptrend, as a weak dollar will be forcing traders to hedge by buying precious metals. Oil was hurt yesterday after the DOE released its inventory numbers, however with the US dollar on the defensive this morning, we expect the contract price to creep towards 140 by the end of the week.


Tuesday, July 15, 2008

BetOnMarkets Morning Update - 16/07/08

The FTSE is currently trading higher, a sign that traders are expecting better then expected economic data out of the UK. Just before the FTSE opens the Office for National Statistics will release the British employment data for June. A better then expected employment number would throw cold water on the notion that the UK is in an economical slowdown.

Gold continues to ride the wave of the weak dollar, as the yellow metal traded at 972 dollars per ounce. Traders are exciting the greenback in droves pushing the Euro north of 1.60 while the Pound is trading above the 2.00. Oil was actually a loser yesterday, however today the Department of Energy is releasing its inventory numbers, so we are expecting for a volatile trading day.


BetOnMarkets Morning Update - 15/07/08

The FTSE is currently indicating a weaker opening while traders await the release of the Consumer Price Index numbers for the month of June. While only a gain of 0.4% is expected, higher then normal oil prices will push this number higher. A higher then expected CPI number will result in a very weak open for the FTSE, as the BOE will have its hand forced into raising interest rates at its next meeting. Couple this with the on going worry over the state of the financial system, and we are in for a very rocky trading day.

Commodities enjoyed and very profitable trading day, as oil is benefiting from a strike in Brazil, and tension in the Middle East. All of this has added to 145 dollars per barrel of oil. Gold is also benefiting from the tension in the Middle East, and traders are buying gold to hedge against the US dollar. Some worry that US will be brought in to another war which will put pressure on the greenback.


Monday, July 14, 2008

BetOnMarkets Weekly Briefing

Economic calendar for week 14th - 18th July 2008.

It was a sea of red again last week as stock markets across the world finished down heavily on the week. The FTSE 100 finished down 3.26%, the CAC down 4.80% and the DAX down 2.35% on the week. US markets faired slightly better thanks to an attempted rally towards the close on Friday. The S&P 500 closed down 2.14%, the Dow down 1.67% and the Nasdaq 100 down just 1.28% on the week.

Irans testing of missiles caused a spike in crude oil prices, to make yet another record high above $147. Although the US and Israeli government have spoken about a diplomatic solution, speculators obviously are not convinced. Investors flocked to traditional safe havens such as Gold which closed near $960.

The catalyst for much of the selling last week is the unraveling doomsday scenario of a US Government bail out, of Fannie Mae and Freddie Mac. These government sponsored enterprises (GSEs) together own, or guarantee half the $12 Trillion of outstanding US home loans. Fed member, William Poole spooked markets by stating that the two firms are now technically insolvent. The ratings agencies are maintaining the AAA ratings on the stocks, but derivatives traders are scoffing at this; valuing their debt 5 points lower. Western banks also have a stake in this because they own some of the debt associated with the two companies. Whatever form the eventual bail out takes, it has the potential to make the UK Governments handling of Northern Rock, look a trifling affair in comparison.

The focus at the start of this bear market, was around the ability (or inability) of banks to raise capital, and maintain their capital adequacies. Unfortunately as the crisis has continued, the situation has only worsened. With large chunks of financial firms assets still tied to the housing market, we appear to have a self perpetuating negative cycle. As house prices collapse, banks such as Bradford and Bingley struggle to raise capital; as a consequence, they tighten their lending practices, which in turn puts further pressure on an already fragile housing market. This was evidenced by the collapse of US mortgage lender IndyMac Bancorp on Friday. Similar to Bradford and Bingley, IndyMac specialised in self cert type mortgages, which have a higher risk of default than traditional loans.

US pending home sales dropped 4.75% against the expected -2.8%. Year on year, US foreclosure activity is up 53 percent from June 2007. One in every 501 U.S. households lost their home to foreclosure, received a default notice, or was warned of a pending auction. California, the home of IndyMac has been one of the hardest hit US states with one foreclosure filing for every 192 households in June. The UK market is fairing little better. Last week, the latest Halifax house price index showed than houses were on average 8.6% down on last years levels. The acceleration of this decline is already well ahead of recent housing recessions.
The week ahead is full of top tier economic announcements. We start with UK PPI figures on Monday and CPI figures on Tuesday. Both these data sets will add fresh colour to the BOE inflation letter tentatively planned for the Tuesday. Tuesday also brings the UK RICS house price balance, and sees the start of a two day Bernanke testimony before congress. Thursdays US housing data will round off what is a very busy week on the economic news front.

Central bankers are currently stuck between a rock and hard place with regards to interest rates. The decline in the housing market and general economy might normally lead to rate cuts, but this is currently being resisted due to soaring inflation. Movements on the currency markets usually track interest rate decisions or expectations. The GBP/ USD exchange rate has been trading in a range between $2 and $1.94 over the last quarter (April to June), perhaps as a function of the gridlock in rates policy for the Fed and MPC. However, the potential for massive liabilities for the US government with potential bank bail outs could push the GBP/ USD outside of this range in the near future. A One Touch trade predicting that the GBP/ USD will touch $2.00 at least once during the next 16 days could return 28%.


Thursday, July 10, 2008

BetOnMarkets Morning Update - 11/07/08

The FTSE is currently indicating a slightly higher opening, as traders are trying to understand the reason behind the no action move of the BOE. With high inflation and slowing GDP the UK economy is poised to enter into a period of stagflation, which would be disastrous to the FTSE and the GBP/USD.

A strike by Brazilian oil workers pushed oil prices higher by 4 percent. Oil also rose after Iran test-fired more missiles in the Persian Gulf and a Nigerian militant group said it will end a cease-fire this week. We believe that oil will finish the week above the 140 per barrel level. Gold made a break towards the 950 dollars per ounce level, but yet again got rejected before the precious metal was met with profit taking. Another crack at 950 is in the cards.


Wednesday, July 9, 2008 Morning Update - 10/07/08

The FTSE is currently indicating a sharply lower opening. Traders are hedging their bets ahead of the Bank of England's interest rate decision. Judging by the futures market, traders are counting on a rate hike. It looks like the BOE is between a rock and a hard place, having to choose between controlling inflation or saving the UK economy from entering a recession it seems like traders are convinced that the BOE will chose to control the spiraling inflation this morning.
Oil pulled out of a steep two-day slide yesterday after US data showed a big drawdown in crude inventories and OPEC-member Iran conducted missile tests that raised risk premium in the price of oil. We believe that oil is heading back to its 140+ levels.


BetOnMarkets Morning Update - 09/07/08

The FTSE is currently indicating a sharply higher open, as traders are anticipating better then expected trade balance figures due out at 8.30am GMT. While there have been a lot of rumours that the UK economy is teetering on the brink of a recessions, a healthy trade balance will dispel those rumours, and help the FTSE after yesterdays massive selloff. Most traders are preparing for the BOE interest rate decision on Thursday morning. We believe that there will be no rate hike, and there is actually a slight possibility for a rate cut after the abysmal manufacturing and production numbers early this week.

Oil has been on a victim of profit taking and a strong US dollar, falling more then 9 dollars since hitting 145.85 per barrel on July 3rd. While this is most welcomed by everyone other then the oil producers, the cheap prices are short lived, as consumers and corporations will take advantage to buy oil at these low prices for future use. Gold has been a lower for the last 4 days, and it does not look like it will change today. Lower oil prices and a strong dollar has traders selling the precious metal, which is used to hedge against inflation and weakness in the US dollar.


Monday, July 7, 2008 Afternoon Update - 07/07/08

The FTSE is currently indicating a higher open, as traders are waiting for the release of the UK Industrial and Manufacturing Production numbers. While traders are predicting no change, we believe that this is very optimistic. We believe that both the industrial and manufacturing production numbers actually fell in June. A slow down in the UK production will force the BOE think twice before they raise interest rates again at the next meeting.

Gold was on the weak end of things as the US dollar benefited from better then expected employment numbers. With no major news until later today, we expect gold to continue its retreat, and US dollar to strengthen vs. the major currency pairs. Oil is also weaker this morning, mainly due to the fact that the contracts are priced in US dollars.

Sunday, July 6, 2008

BetOnMarkets Weekly Briefing

Contents This Week:
Economic calendar for week 7th - 11th July 2008.
Commentary: The week ahead.
Economic Calendar for week 7th - 11th July 2008

PLEASE NOTE - All times GMT not BST. BST is +1 Hr.

Monday July 7th:

EU - 08:30 - Sentix Investor Confidence.
UK - 08:30 - Industrial Production M/M.
UK - 08:30 - Manufacturing Production M/M.
GE - 10:00 - Industrial Production M/M.
UK - 23:01 - NIESR GDP Estimate.

Tuesday July 8th:

UK - 08:30 - DCLG HPI Y/Y.
US - 14:00 - Pending Home Sales M/M.
US - 14:00 - Wholesale Inventories M/M.
US - 19:00 - Consumer Credit M/M.
UK - 23:01 - Consumer Confidence Index.

Wednesday July 9th:

GE - 06:00 - Trade Balance.
FR - 06:45 - Trade Balance.
UK - 08:30 - Trade Balance.
UK - 09:30 - BRC Shop Price Index Y/Y.
US - 14:35 - Crude Oil Inventories.

Thursday July 10th:

FR - 06:45 - Industrial Production M/M.
EU - 09:00 - ECB Bulletin.
UK - Tentative - MPC Rate Statement.
UK - 11:00 - Official Bank Rate.
US - 12:30 - Unemployment Claims,
EU - 14:35 - Natural Gas Storage.

Friday July 11th:

US - 12:30 - Trade Balance.
US - 12:30 - Import Price Index M/M.
GE - 13:55 - Prelim Michigan Sentiment.

EU - Europe wide
FR - France
UK - United Kingdom
US - United States
GE - Germany

The week ahead.

The half year report card for global stock markets was not one to be proud of. The first half of 2008 was the worst first half to a year for the Dow Jones Industrial Average since 1970, when the index was down 14.60%. The 14.44% decline of 2008 is actually the tenth worse performance since 1900. July hasnt exactly started off with a bang and US traders may be thankful for the long weekend last week. The S&P 500 closed the week down 1.19%, registering its lowest daily close for almost two years. June was especially hard for US markets with a drop of 8.55% for the S&P 500, and a 10.19% collapse on the Dow, making up most of the years losses to date.
The culprits are not too hard to find. The first half performance of the US financial sector was -30%, while the Energy sector managed to find a rise of 8.12%. If you were asked to list the top dangers for the global economy, you would be hard pressed to find any factors that are not already playing themselves out. Firstly we have oil prices that seem to reach new record highs with each passing week. $150 per barrel is looming ever closer. This price action is linked to the second danger, further conflict in the Middle East. Last week, a former Israeli air force commander was quoted as saying that Israel was ready to attack Iran if diplomacy fails. The Iranian oil minister has responded by saying that Iran is ready to defend itself, and that an attack on Iranian nuclear facilities would be the start of war.
Oil fuelled inflation is still causing central bankers headaches, with Citi Group today predicting that UK inflation jumped to 4.6% in June. Last week, the ECB went to great lengths to stress that the recent rate hike didnt automatically precede a series of hikes. Nevertheless, Trichets firm stance on fighting inflation has caused some disagreements between the ECB and the Federal Reserve in the US. The final horseman of the apocalypse could be when the global economy finally yields to the pressures of inflation and the aftermath of the credit crunch. There are increasing signs that the worlds largest economy is slowing. Thursdays US payroll figures showed a 20% increase in unemployment year on year. Also Non Farm Payrolls shrank for the 6th consecutive month. With UK house prices going the same way as the US market, the bricks and mortar ATM is no longer paying out, and UK households are already at record levels of indebtedness. Shocking figures from Marks & Spencer last week was testament to this.

The week ahead is a quieter affair with fewer top tier announcements than the week just gone. That said, there are still some potential market moving datasets due. UK industrial and manufacturing production figures are released on Monday morning. The recent Purchasing Managers Index monthly survey of UK manufacturing was described as truly dreadful, with indications that this sector at least may be heading for a recession. On the same day, we provisionally have the UK Halifax Price Index delayed from last week. On the same note, US pending home sales are released on Tuesday. Bad news is expected for both, the only question being how bad the news actually is.

The weeks top ticket trading is the MPC interest statement on Thursday. The Bank of England is still stuck between a rock and a hard place, with record oil prices driving inflation, and slowing consumer spending hurting the economy. A no change verdict is widely expected to be the more likely course of action.

With next week being relatively lighter on the economic news front, it may be a good time for a trade that looks to profit from low volatility. A barrier range trade wins if neither of two levels are hit within the specific time period. A barrier range trade predicting that the FTSE 100 will not touch 5016 or 5875 in the next 16 days could return 10%.


Thursday, July 3, 2008

BetOnMarkets Morning Update - 04/07/08

The FTSE is currently indicating a flat open, as we approach the first Friday of the Q3. With the US off on holidays, we believe that the volume of todays session will be low and boring. Traders do have a few things on their mind, with the ECB hinting at the fact that this might be the only rate hike, UK traders are wondering just how much room will the BOE have. A lower interest rate outlook is a positive thing for equities, and we are expecting an extra boost of 100 points for the FTSE.

Oil is continuing its push to hit 150; we feel that once the peak is hit, traders will do some profit taking. This will cause a fall in the price, probably back to the 130 level. Gold managed to survive the US positive news, only giving back 10$ per ounce. We believe that the trend is strong, and we will see 950 within the next week.

Wednesday, July 2, 2008

BetOnMarkets Morning Update - 03/07/08

The FTSE is currently indicating a sharply lower opening, following in the footsteps of the Asian markets, which are down more then 1% in morning trade. Record oil, more downgrades in the financial sector expect to weight heavily on the FTSE when it opens. We expect the market to be light until 12.30PM GMT, when US will release its employment data, which will set the tone for the rest of the day. We expect losses which will be heavier then expected by analyst, looking for a number around the 100 thousand jobs lost in June.

Oil hit another record, as investors are now using oil as a hedge against the US dollar. With the EU rumoured to increase its benchmark interest rate today, which would strengthen the Euro versus the dollar, more and more traders are buying oil contracts as a double bet. Benefit from the increasing price of oil, and the weakening US dollar, in which the oil contract trades. We believe that oil will touch 150 before the end of July. Morning Update

The FTSE is currently indicating a sharply higher open, as traders are betting that the Construction spending data which will be released at 8.30am today will be better then expected. While this will be another month that spending slowed down in the sector, we believe that most analysts are being extremely bearish, especially after yesterdays huge miss by the manufacturing numbers.

Oil should continue its volatile trade as traders are awaiting the US inventory numbers. Some expect the inventory to fall for the sixth time in seven weeks, as consumers have been cutting back on all unnecessary and some necessary trips. Gold continued its advance as traders continue to buy precious metals as a hedge against the weakening US dollar.

We expect gold to touch 950 dollars per ounce.

Tuesday, July 1, 2008

Stocks down, Gold and Oil up

Financial markets were a sea of red numbers last week as the classic ‘Fade the Fed’ trade played out. The initial reaction to Wednesday’s US interest rate decision was neutral to positive, then the selling set in and hardly stopped. Thursday’s mini rally did a very poor job of papering over the cracks in the global economy. On Friday those cracks were wide open for all to see with housing and financial stocks hit the hardest. Barclays in particular was back to square one, erasing all gains from the start of the week, as investors took a second look at their fund raising plans in light of Goldman’s predictions of further write downs for major western banks. Citi Group was also floored on similar sentiment, falling to its lowest level since 1998.

The Dow Jones Industrial average ended the week down 4.2% and nearly 8% down over the last fortnight. The FTSE faired little better, falling 2.88% on the week and 6.26% over the fortnight. The twin evils of Gold and Oil were again the sectors in demand, as investors looked to profit from further economic turmoil, and hedge their bets against inflation. Oil refused to budge below $130 and set a new all time high of $143. $150 a barrel, scoffed at by some just a few months ago, is looking increasingly more likely and is surely now only a matter of time.

Some positive cheer came with US consumer spending rising as Bush’s stimulus cheques hit. While this lift at least created a pause from the continuous stream of bad news, market participants were wary of reading too much into what may be a short term patch for the US economy.

Despite a shortened trading week with Independence Day on Friday the 4th of July, it is a very busy week ahead. Currency markets will be eyeing Thursday’s ECB interest rate decision and accompanying statement. The European Central Bank is expected to raise rates by a quarter of a percent to 4.25%. With this starting to be priced in already, market participants will be more interested in the prospects of a string of inflation fighting rate rises from the ECB.

Thursday also sees the all important US Non Farm Payroll data brought forward a day because of the holiday on Friday. This more than anything could have the greatest impact on currency and equity markets for the new month of July. The UK certainly doesn’t escape without any top tier data with two lots of house price announcements. Nationwide release their data on Tuesday and The Halifax House Price index is tentatively planned for Thursday. The news is expected to be dire from both these announcements with Stephen Nickell, the head of the Prime Minister’s housing planning unit predicting that the UK housing market won’t boom again until 2015. To make matters worse, recent data shows that British households are more indebted than any other country in recorded history. 173% of household incomes are owed in debts. This is higher even than Japan’s peak in 1990 that preceded decades of deflation. Barclays added to the gloom by warning their clients to prepare for the financial storm ahead.

While Thursday was an impressive sell off, doubts remain whether the ‘puking’ point has been reached just yet. Bottom feeders will start to become interested, but the VIX options volatility index is still some way off the January and March spikes. In addition we are not seeing the same flight to safe havens such as short term fixed income, that we saw in the first quarter.

According to BetOnMarkets traders, with Gold bottoming around $860 and renewed concern over inflation, it is perhaps time for the precious metal to follow its evil twin, oil higher after a few months in the doldrums. A One Touch trade for Gold to hit $1000 again within the next two months could return 70%.

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BetOnMarkets Morning Update

The FTSE is currently indicating a slightly weaker open, while traders are awaiting the release of the Manufacturing Purchasing index. There has been a lot of ink spent discussing the state of the UK economy, and a slowdown in the manufacturing area would cause some concern to the BOE who are currently battling inflation and hinted at rising interest rates at the next meeting. We believe that the Purchasing number will be weaker then expected and would cause the FTSE to open sharply lower.

Oil spent most of the day trading north of the 140 level. Demand from Asian countries is expected to outpace declines in the U.S. as a result we will not be getting relief anytime soon. Gold spent most of the day battling profit taking after gaining more then 3 percent last week. We believe that gold will continue its upward trend this week, as traders are betting that the US employment number , which are released on Thursday, will come out worse then many expect.