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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.