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Monday, January 26, 2009

BetOnMarkets Afternoon Report

The clear catalyst for today’s rally has been the announcement from Barclays that it won’t be going to the market or government for more cash. This more than anything has strengthened investor’s confidence in Barclays and across the sector as a whole. However, as impressive as today’s performance is, the rally needs to be put in context. Shares in Barclay’s are still around 50% lower than they were just two weeks ago. Investors are welcoming today’s announcement but the share price still has to more than double to reach the levels it hit at the start of the year.

The banks have been like a bad friend continually asking for money and promising to pay it back, but never doing so. Although they appear to have confessed all their sins today, investors are still cautious still have concerns that they will be let down again despite the claims that the banks have ‘cleaned up’.
Better than expected new home sales from the US are providing a follow on boost for major markets. Prices are still down by record proportions, but there are at least signs that house prices have reached an equilibrium with people’s ability to pay (and get credit). It may be some time before the same can be said about the UK housing market.