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Thursday, October 30, 2008

BetOnMarkets Afternoon Report

Today’s US GDP figures hit the headlines, showing that the US economy shrank by 0.3%, the most since 2001. The figure was actually not as drastic as initially expected and as a result, markets have managed to hold on to the morning’s gains. Aside from the market’s reaction to US GSD figures, expectations of a rate cut from the bank of Japan tomorrow has sent Asian markets soaring over the last three days and the rest of the world has been rallying hard with them. The Nikkei is currently up a staggering 26% since Tuesday alone, thought it will have to do the same again and more to recoup the 33% losses since the start of the 3rd quarter.

In the UK, the energy sector is being pulled in different directions. The previously soaring energy prices helped Royal Dutch Shell to report a better than expected 71% jump in 3Q profits, yet their share price is down around 4% on the day. Investors are less interested in the profits shell has just made, and are more concerned about the prospect of future growth. Judging by today’s share price reaction, investors see much lower profits in the future now oil has turned the corner. On the other hand smaller UK oil services companies such as Petrofac and Amec are performing well today. There is speculation that these support companies might be better able to ride out lower oil prices with their lower cost base and reduced direct exposure to oil prices.