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BetOnMarkets Afternoon Report

Discussion in 'Market Predictions and Reports' started by Erik, Jan 28, 2009.

  1. Erik

    Erik BetOnMarkets Representative

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    Equities shot out of the starting gate today on both sides of the Atlantic. In the UK, it was Lloyd’s turn to join the party after a bullish note from Citi Group whet investors’ appetite for the new banking giant. With a fundamental valuation of financial shares being difficult to say the least, confidence has been the currency of choice ever since the credit crisis broke. Today, confidence is working for the banks as the idea of nationalisation is shoved to the sidelines for now.

    US markets launched higher from the open in large part due to the bad bank plan announced by the Obama Government. Such a opening large gap higher is unheard of on a Fed day, normally rate decision days are tight affairs before the announcement. No-one expects the Fed to cut rates this afternoon, but the policy statement will certainly be a market mover and if the markets like what they hear, we could push even higher off the 2008 lows.

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  2. Erik

    Erik BetOnMarkets Representative

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    After a positive first half of the week, global equities are serving a reminder of just how difficult bear markets can be. Traders are quick to grab whatever short term profits they have made, making it difficult for rallies to build momentum. Banking shares have reversed a good chunk of the gains made over the last few days, but are still holding above the closing levels from last week. Today worry isn’t specifically related to complex financial deficits, fears are more in relation to general analysis that banks are not the place to be in during a recession. With house prices continuing to plunge on both sides of the Atlantic, rising unemployment and an increased risk of default on loans, the recession itself is enough put pressure on banks. This is before you take into account their dire capital adequacy positions.

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  3. Erik

    Erik BetOnMarkets Representative

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    Markets are roaring higher this afternoon on better than expected economic data from the US. Today’s better than expected ADP jobs report augurs well for Friday’s all important Non Farm Payroll data. Markets are also encouraged by the noises coming from the Obama administration on the use of tax breaks to stimulate the troubled car market.

    In the UK, banks are pushing higher as speculation mounts that the bad bank plan is back on the cards. RBS is rumoured to be the first test of this model with other banks applying this template if successful. Judging by the rally in financial shares today, traders are keen on this plan to come to fruition.

    Commodities are firmer, with oil finding support above $40. This is welcome news for oil producers such as BP and Shell which have rallied well from the lows of yesterday. It is even better news for the Russian government which had its credit rating downgraded today due to fears over the impact of the collapse in oil prices.

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  4. Erik

    Erik BetOnMarkets Representative

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    Despite today’s US payrolls falling by a more than expected 598,000, stock markets are powering higher. Let’s be frank, this was an extremely weak employment report with 3.5 million fewer Americans employed In January than a year earlier. However, the world’s biggest economy isn’t willing to roll over and die just yet. The rate of decline is accelerating, but US unemployment is still the peaks of the 1980s and 1970s. Stock markets are moving higher today on the hope that today’s dire figures will act as a catalyst for the massive Obama stimulus package. When stock markets go up on bad news, it is often a good sign that investors have re-discovered their appetite for risk taking.

    Even BP and Shell are moving higher today despite oil prices dipping below $40 a barrel. The bears have been handed plenty of opportunities to take control, but so far today, the bulls have won out. That is arguably a very encouraging indication that 2009 won’t end the year as it started.

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  5. Erik

    Erik BetOnMarkets Representative

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    World stock markets are mixed, with the FTSE 100 nudging ahead on a day of tepid trading. The better than expected figures from Barclays has certainly given UK equities on boost, but it is not enough to make the UK’s benchmark index of 100 stocks push through Friday’s trading range.

    Barclay’s figures have been well received, but their share price still has a long way to go if it can be deemed to have turned the corner. Last February, Barclay’s shares hit £5.24, even with today’s 12% rise they are still more than £4.00 below this level. The so called independence premium could start to play out in the second half of the year, especially if Barclays start to pay a dividend once again. However, for now, investors are understandably hesitant to take anyone’s word on this.

    Wider equities are range bound as the benchmark US indices retreat on the news that the Obama bailout plan won’t be announced until tomorrow. Markets more than anything hate indecision and until a resolution looks likely, or at lease strong rumours of a resolution circulate, equities will trade in a tight range until tomorrow afternoon.

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  6. Erik

    Erik BetOnMarkets Representative

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    Despite some better than expect US economic data, markets are firmly on the back foot today as economic and banking fears continue to darken sentiment across the globe. After rallying into Treasury Secretary Geithner’s speech on Tuesday, US markets are continuing to unwind. Perhaps it was a case of markets expecting clarity and getting nothing of the sort.

    Of more concern was the data released from the ECB that stated that borrowing from the marginal lending facility hit 10.4 billion Euros, well above recent averages and the highest since November 10th. It may be a blip, but this lending spike could imply that a major bank is in trouble. Irish banks are seeking recapitalisation and UK banks are thought to making use of the ECB’s facilities as well as their European counterparts. Barclays is the stand out faller amongst financials today and though there is no evidence of a connection, it is worth keeping an eye on this.
    Oil continues to drop as global economic activity falters. On the other hand gold is on the rise and pushing back up towards $1000 as investors seek out safe havens while stock markets gyrate and central banks scour their text books for the next plan of action.

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