BetOnMarkets Morning Update

Erik

BetOnMarkets Representative
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BetOnMarkets Morning Report

The FTSE currently indicates a very strong opening, as the global rally continues. The buying which started late in US trading and resulted in the SP500 to close up almost 11 percent, is poised to continue this morning in London. Although its too early to celebrate, traders are seeing signs that the credit market, which earlier this year paralyzed the stock markets, is easing up. While we are not certain if this was the bottom of the barrel, what we are certain of is that volatility will continue.

Commodity traders will be waiting until the inventory report by the US energy department is released before deciding the next short term direction for oil. While there are worries that a global slow down will cause the demand to fall faster, the OPEC cuts supplies for the near term oil should be helped by the cold weather that has hit the US this week. Look for oil to stay above 63 dollars until the inventory report is in.

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Erik

BetOnMarkets Representative
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BetOnMarkets Afternoon Report

Today’s rally has helped ensure that October 2008 is spared the embarrassment of being one of the worst months on record, but we are far from being out of the woods yet. Since September there have been two rallies of today’s magnitude on the FTSE and in each case, the gains were wiped out in just over week. October 13ths big rally promised much but the day’s gains were reversed within just three days. Although October could mark an intermediate term low point, it is highly unlikely that it will be plain sailing from here. What is more likely over the next 3-6 months is continued volatility with many more days rising or falling by 5%. If (big if) we can get some follow on buying from here over the next week or so, we could continue to back and fill higher over the next few months.

Before this can happen, markets face a very harsh test with the US interest rate decision this evening. Currently a cut down to 1% is the most likely scenario, though some are calling for a cut down to 0.75%. Although this may happen eventually, we believe that a cut greater than 0.5% this month is less likely than people think. The continued improvements in the credit markets are a factor, the Fed may fear using up all their bullets too soon as Japan did after their economic boom turned to bust in the 80s and 90s. When rates reach 0% there is nowhere else to go.

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Erik

BetOnMarkets Representative
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BetOnMarkets Morning Report

The FTSE currently indicates a flat opening, as comments from David Blanckflower, policy maker for Bank of England, hit the wire regarding an impending rate cut in UK. The main concern is if the BOE were to slash rates drastically, it could possibly result in a case of hyperinflation. However if no interest relief is offered UK could face the prospect of a relatively deep and long-lasting recession. After scanning the indicated opening prices of the major European equity markets, there is a strong chance that the FTSE will be in positive territory at the opening.

Commodities got a boost last night, as the value of the US dollar took a hit. Oil jumped 4 dollars per barrel, as traders are hoping that cheaper credit will jump start the economy and increase demand. Gold gained on after the rate cut, as investors are yet again running for the safe haven of precious metals, amid uncertainty in the US credit markets.

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Erik

BetOnMarkets Representative
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BetOnMarkets Morning Report

The FTSE currently indicates a lower opening, as a worse then expected consumer confidence report has thrown ice water on the recent rally. The survey shows that consumers are spooked and are delaying major purchases. This is not good news for retail stocks, which are expected to open weaker this morning. There is a chance that the FTSE will incur a case of profit taking today to close out the week

The boost that oil received on Tuesday after the interest rate was cut, was short lived as crude oil finds itself trading below 65 dollars per barrel again. The end of the month will mark the biggest single month drop since trading started in 1983. We expect a quiet day to end out the week.

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Erik

BetOnMarkets Representative
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BetOnMarkets Afternoon Report

Global markets opened the day around and two percent have made little headway throughout the day. Some have attributed today’s sell off to the market’s dislike to a having a democrat president, but there is little evidence to suggest this. Statistics show that markets have no significant reaction to either party winning the presidency one month on from election today. Today’s sell off is more a function of the stellar run global equities have been on since the end of last month. The FTSE has managed to finish higher for eight days on the trot, which is a very rare event indeed so it is understandable that traders are taking the opportunity to book profits.

UK banks are for once out performing the wider markets as credit conditions continue to improve and speculation mounts that the Bank of England might be considering a whole percentage point cut tomorrow. Last week, a 0.5% cut was the clear favourite course of action, but as the week progresses there is increasing chatter that the MPC will go the whole hog.

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Erik

BetOnMarkets Representative
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BetOnMarkets Morning Report

The FTSE currently indicates a very weak opening, as traders await the announcement from The Bank of England regarding a rate cut. Traders worry that the BOE might not cut aggressively enough to help the economy out of this slowdown. However an over aggressive cut would unleash hyperinflation, which will hurt the consumers as their buying power will evaporate. If we get a 50 basis point cut, it is possible for the FTSE to open the day in positive territory.

A surprising increase in the inventory of gasoline was the cause for the 5 dollar per barrel drop in yesterdays trading. While the demand continues to fall, we expect a few more weeks of growing inventory before the OPEC cuts finally affect the price per barrel. We still expect oil to continue to fall towards the 60 dollar per barrel level.

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juli

Recruit
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is this for forex

Hi Erik,

Is this for forex? It seems more like stock index related. It also seems like it is more to the UK. Do you use this info to trade forex and what session?

Thank you

J
 

Erik

BetOnMarkets Representative
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BetOnMarkets Afternoon Report

Today’s US payroll figures were ugly by any measure, with the reported loss of 240,000 jobs slightly worse than expected. The worse data point to come out today was actually the downwards revision to Septembers payroll figures. Today’s revision pushed September payrolls down from -159,000 to -284,000. This means that so far in 2008, around 1 million jobs have been lost, most of these have been in the financial sector but the slump is prevalent in virtually every US sector.
On the face of it, it is perhaps surprising to see equity markets rebound so strongly especially in the face of accelerating unemployment in the world’s biggest economy. However, the reality is that financial markets are forward looking which means that most of the time the bad news is already taken into account. Today’s payroll figures could have been even worse than they were and judging by the rebound we’re seeing, a significant part of the falls on Wednesday and Thursday may have been traders rushing in to sell ahead of today’s numbers. The net result is that the two day sell off appears to have overshot slightly.
On the credit markets, libor and credit default swaps continue to improve for the worlds largest financial firms. The cost of insuring against companies defaulting on their debt is still very high by historical standards, but they have still come down a long way in the last few weeks. Morgan Stanley and Goldman Sachs still remain a concern while the UK’s HSBC currently has the lowest CDS of the remaining major independent banks and brokers. In short, things have most certainly improved since the dark days of October, but there is a long way to go before we can say safely say that this credit crisis is over.

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