BetOnMarkets.com Afternoon Update - 27/06/08

Global stock markets are continuing to trade in a timid fashion this Friday. Traders are understandably nervous about taking on any large positions going into the weekend after such a mauling the previous day. On the positive side, US markets are receiving lift with US consumer spending rising as Bush’s stimulus cheques hit. While this lift is at least creating a pause from the continuous stream of bad news, market participants are wary of reading too much into what may be a short term patch for the US economy. In the UK, Barclays is one of the largest fallers on write down fears, while understandably, energy stocks are the strongest with Tullow Oil up significantly. While Thursday was an impressive sell off, we doubt we’ve reached ‘puking’ point just yet. The VIX options volatility index is still some way off the January and March spikes and we are not seeing the same flight to safe havens such as short term fixed income that we saw in the first quarter. The Dow hit a new low for 2008 yesterday. We don’t think other markets will be long in following suit.

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BetOnMarkets.com Moring Update

The FTSE is currently indicating a sharply lower open, as traders are betting that the UK GDP number will come out weaker then expected. Oil and inflation are being blamed for the slow down in the UK economy. While economists are expecting a modest 0.4% growth, we are betting that the growth will be smaller then that, some traders are actually expecting a contracting number.

Oil is currently trading at an all time high, however this will be short lived. In US congress passed a bill which would require the CFTC to implement position limits, or constraints on the size of the stake each speculative investor can own, and raising margin requirements. Increasing the margins paid by hedge funds, will be a negative move for all the commodities, as traders will move to higher yielding contracts.

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BetOnMarkets Afternoon Update - 26/06/08

Financial markets are a sea of red numbers today as the classic ‘Fade the Fed’ trade plays out. The initial reaction to last night’s interest rate decision was neutral to positive, then the selling set in and hasn’t stopped since. Yesterday’s rally did a very poor job of papering over the cracks in the global economy. Today those cracks wide open for all to see with housing and financial stocks hit hardest. Barclays in particular is back to square one, erasing all of yesterday’s gains as investors take a second look at their fund raising plans in light of Goldman’s predictions of further write downs for major Western banks. Citi Group has also been floored today on this news, falling to its lowest level since 1998. The twin evils of Gold and Oil are again the sectors in demand as investors seek to profit from further economic turmoil and hedge their bets against inflation. We see no significant change forthcoming until global indices revisit their March lows.

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BetOnMarkets.com Morning Update

The FTSE futures are indicating a sharply lower open this morning, as the FTSE is prepared to trade for the first time since the FOMC announcement yesterday. While there was no change in the interest rate, the statement which came out with could have been used for both UK and Europe. Inflation is like the family member nobody likes, it is an embedded part of the economy, and currently its causing havoc around the world. Today traders will spend most of the day trying to position them self ahead of tomorrows UK GDP report and window dressing as we are about to end the 2nd quarter.

Oil fell on the news that US inventories rose for the first time in six weeks. Record high oil prices have forced users to cut back their oil usage. United Arab Emirates helped push oil prices lower when they announced that they will be increasing their output by 200,000 barrels per day next month. Gold joined the commodity losers as the drop in energy prices eased the inflation concern, against which traders use precious metals as a hedge. We are expecting for this to be a very volatile week for gold, with major economic announcements coming up from both sides of the Atlantic.

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BetOnMarkets Afternoon Update

Fed days are like the proverbial game of two halves. Recently markets have tended to have positive bias going into the meeting, but the reaction the market action post Fed announcement is an entirely different ball game. We usually see some rapid moves and counter moves as traders absorb the decision and the accompanying commentary. US markets have indeed start off higher today as traders speculate that a rate hike is less likely than previously thought. European markets set the tone early this morning, but have made little traction since. Barclays and UBS are posting impressive increases on the day, with Barclays receiving the market’s seal of approval for its plans to raise around $9bn in fresh capital. US markets were also encouraged by economic data that for once didn’t come out as worse than expected. Both Durable goods and US new home sales were roughly in line with expectations.

The FTSE has been range bound for most of the day and we see little chance of this changing between now and the close. With the great unknown of the Fed announcement due after the close, traders don’t want to have their fingers burnt with any large overnight positions.

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