All eyes are on the major US markets to see if they can hold above the recent lows. 850 in particular seems to be a very important level for the S&P500 to hold if it is to stand any chance of rallying from here. In many ways, UK financials are in a similar situation. With the exception of HSBC, all major UK financials including Lloyds, HBOS, RBS and Barclays are revisiting their lows of the year so far. After all the bailouts and improvements in the credit markets, investors are asking themselves one simple question; “Exactly how will this company make money?”. Perhaps, its an obvious question to ask, but it is one that was oft forgotten during the previous bull market as share prices went through the roof. Now with punitive financial loans, curbs on dividend payments and uncertainty over exposure to toxic assets, investors are understandably sceptical of where any future growth might come from. Friday’s wild swings on the Dow Jones have been attributed to hedge funds having to sell assets in order to meet redemption requests. This again may be bad news for banks who extend multi billion pound credit lines to hedge funds, many of whom have now lost well over 20% for the year to date.
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