29th February 2008
Ryan Kneale, Market Analyst at City bookmakers BetsForTraders commented:
""During the last week we have seen a more than three times the normal number of clients betting on UK and US banking stocks share prices to rise. Whether this is a short term trend attempting to cash in on the snippets of good news or whether BetsForTraders.com clients will continue to be bullish for the long term remains to be seen. In the foreign exchange markets we are seeing an increase in people betting on the Dollar to rise after a dreadful last few weeks as traders believe the Dollar is approaching rock bottom. The ECB appear to be in denial that European growth is suffering and are still hiding behind the inflationary risk facade, but once the cracks are exposed I think the Euro is in for some steep falls. "
""Looking at the macro economic data released next week, the releases that stand out are the interest rate decisions by the Bank of England and the European Central Bank on Thursday and the US Non Farm Payroll report on Friday. We are expecting high market volatility around the time the data is released and a surprise rate cut by the BOE or ECB could really throw the cat amongst the pigeons. With regards to the Non Farm Payroll report any deviation from the consensus to the downside will send the US Dollar crashing and with this we would expect to see record lows against the Euro tested further."
""After Standard Chartered fared better than expected RBS as expected and HBOS less than expected how will Europe's largest bank HSBC fair on Monday when it releases its annual earnings? Here at BetsForTraders.com we are expecting good results from HSBC on Monday as during the last week we have seen the number of bets on them treble, but what is even more astounding is the number of these bets that are betting on a rise in their share price, which stands at just over 82%"
""The Sentiment Index has risen sharply during the last week as more and more BetsForTraders.com clients begin to bet on the markets rising. During the last week the Sentiment Index has risen to a one month high of 56 and the last time the index broke above 50 was at the end of January and this was followed almost immediately by the FTSE rallying. The current Sentiment Index level of 56 is now slightly bullish indicating that around over half of all bets placed this week were betting on the markets to rise. With the Sentiment Index at a one month high, and new signs that the UK and US economies are slowing, we predict the index will remain around its current level throughout the next week as traders contemplate the next big move."
25th February 2008
Ryan Kneale, Market Analyst at City bookmakers BetsForTraders commented:
"During the last week the equity markets have been very reactive to both good and bad news, rising on the former and falling on the latter. The most notable day was Monday when the European markets rallied hard as the nationalisation of Northern Rock, rumours of increased dividends from banks and rising oil prices all combined to help the major indices finish up over 2%. In the UK stronger than expected retail sales data released on Thursday gave the British Pound a much needed boost whilst decreasing the chance of further rate easing from the bank of England in the next few months. Whilst in the US weaker than expected manufacturing data sent the major indices tumbling and took the US Dollar with them as traders began to price in more aggressive rate cuts by the US Federal Reserve."
"Looking ahead we have some interesting macroeconomic data released next week including Mortgage Approvals and GDP in the UK as well as Home Sales, PPI and Durable Goods orders in the US. We are expecting the markets to be very active around the time the data is released and if we see any deviation from the expected values then we may see some explosive volatility."
"Next week we have a large number of earnings announcements in the UK, the pick of the bunch are Standard Chartered on Tuesday, HBOS on Wednesday with insurer Aviva and the Royal Bank of Scotland reporting on Thursday. Having seen Lloyds TSB and Barclays report good figures this week, many are asking the question "who is going to be next with bad news?", therefore I believe next week is going to be a nervous one."
"The BetsForTraders.com Sentiment Index has fallen to one month lows during the last week breaking briefly below 30 touching as low as 28. The last time the index broke below 30 was on the 15th January and this was followed almost immediately by the FTSE falling heavily, as you can see in the chart. This leads us to ask the question: Is history about to repeat itself? Are the markets due another big fall? Currently the Sentiment Index is at 35 and this is still very bearish, indicating that around 65% of bets placed are betting on the markets falling further. If BetsForTraders.com clients are to be believed then now could be a good time to bet on further market falls."
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18th February 2008
Ryan Kneale, Market Analyst at City bookmakers BetsForTraders commented:
"During the last week the markets have remained volatile and have pared back some of last week's heavy losses. The most notable rally was on Tuesday after American billionaire investor Warren Buffett offered to reinsure municipal bonds held by the top bond insurers. The initial positive reaction and rally to Buffett's proposal was short lived though, as on Wednesday traders began profit taking and credit spreads began to widen instilling yet more fear in the markets."
"On Wednesday 20th we see the release of the Bank of England's minutes from their last monetary policy committee meeting, during which the decision was made to cut the UK base rate by 0.25%. We expect the British Pound to be very volatile around this time as traders see how the committee members voted and try to gauge when the central bank will look to cut UK interest rates again. Also on Wednesday the Core Consumer Price Index figures are released in the US and this will give traders a good opportunity to see if the Federal Reserve's aggressive rate cuts have fuelled inflation or whether the Fed have any scope for further rate easing in their bid to "sure up" growth."
"Next week we have a number of earnings announcements in the UK including the first of the big five UK banks Barclays PLC who report on Tuesday. With Swiss Investment bank UBS upsetting the "apple cart" this week will Barclays reveal further sub-prime related losses or exposure and bring the markets down next week? On Wednesday we have BAE Systems and mining group Anglo American reporting their earnings. Anglo American's share price has been boosted recently as they have been the subject of a buyout rumour, with rival miners Rio Tinto mentioned as a potential buyer. With base metal prices still high people are expecting to see good profits from mining groups and Wednesday should be no exception.
"Looking at the BetsForTraders.com Sentiment Index chart one can see that this week the Sentiment Index has been range bound trading between 30 and 40.With the Bank of England remaining hawkish on interest rates it was surprising to see the Sentiment Index begin to rise earlier this week. Perhaps this could be attributed to all the uncertainty in the markets and after calling last week's fall, it could be that traders are returning to neutral ground whilst they contemplate their next move. We expect to see the sentiment index remain relatively neutral during the next week as the markets attempt take a breather before the barrage of earnings results from the big five UK banks."
09th February 2008
Ryan Kneale, Market Analyst at City bookmakers BetsForTraders commented:
"During the last week the markets have once again been very volatile with a negative bias. Financial stocks have taken the brunt of the fall as concerns over US bond insurers losing their credit ratings kept traders teetering on the edge of another mass selloff. With the US creeping ever closer to recession and the prospect of slowing economic growth in the Euro zone becoming more than just a possibility, traders in Europe are buckling themselves in for a bumpy ride."
"On Thursday two of the world's key central banks announced their latest interest rate decisions, the markets got what they wanted with a 0.25% cut from the Bank of England and Dovish comments from the European Central Bank. Good news you would have thought? Wrong. The markets continued heading south and European equities finished Thursday at their lowest close in two weeks."
"Looking forward to next week we have a number of earnings announcements including Swiss investment bank Credit Suisse, mining group Rio Tinto and beverage maker Diageo PLC. Any unexpected bad news from Credit Suisse will have the greatest macro impact as the markets look to the banks for a return to stability. From Rio Tinto we are looking for some strong figures with base metal prices being so high. The only question that traders have though is whether they will be strong enough to convince share holders that the board were correct torejectadvances from larger rival BHP Billiton."
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"Taking a look at the BetsForTraders.com Sentiment Index one can see that BetsForTraders clients began turning bearish at the end of January as they once again appear to have pre-empted a market fall. With the Sentiment Index currently just above 30, traders appear to be expecting further falls in the equity markets despite attempts by the US Federal Reserve and other central banks to sure up economies with cheaper credit. The real issue though is not the cost of borrowing money but the reluctance of banks to lend to one another. Expect a very rocky ride ahead."
Written by Ryan Kneale, Market Analyst at BetsForTraders
2007 was a very mixed year in the financial markets. After markets globally hit all time record peaks during the summer months the continuous bull market we had almost made part of the family suddenly and violently turned. The market crash was to be known as "the sub-prime mortgage debacle" or "credit crisis". It took until December for the after effects of what started in July to subside. I am sure that someone will write a book about whose fault it was one day but for now let’s focus on 2008.
OK, big picture, the US is still the most influential economy in the world and when the US makes a decision, like it or not, the rest of the world listens and goes along with it. The US economy has been slowing for some time and the events of the second half of 2007 accelerated this - US officials are now worried that the country could fall victim to recession. To ease the chances of that the Federal Reserve have cut US interest rates aggressively and made soothing noises about supporting industry.
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The chill has spread and the UK economy has suffered from the recent turbulence. A quarter of a percent rate cut in December was seen by many as too little too late. With house prices past their peak and starting to fall, mortgage approvals down and consumers feeling somewhat downbeat with record levels of credit card debt. This would usually be enough for the Bank of England to lower the base rate some more - only they can't because inflation is still a bit high and the public would only respond by taking out more credit card debt.
The question therefore is what should the Bank do with rates in 2008? Should they risk further inflationary pressure and stave off a repeat of the housing crash of the early 1990s by continuing to cut rates? Or should they manage inflation more closely and hold rates steady? The financial markets are still suffering from a sense of mistrust as no one knows quite where the buck stops with the bad debt of the US sub-prime mortgage mess. Who holds what exposure to it remains something of a mystery and a cut in rates would keep the probability of another Northern Rock at bay. The answer to the 'where now' for rates question is far from obvious.
So how will equities perform in 2008? Will corporate earnings suffer as a consequence of 2007's issues. The sector that will come under the most scrutiny next year is the financial sector. With almost all the major US and European banks reporting write-downs towards the end of last year it will be interesting to see how these write-downs effect overall profits as we come into year end reporting season. Some banks have pre-empted bad news and have issued profit warnings whilst other have remained decidedly quiet, and these are the banks that could rock the markets. We expect more turbulence from the financial sector in what could be a nervous end to many companies financial year.
In contrast to the financial sector, the mining sector has been one of the few shining lights during 2007, as increased demand for core metals and a weak US Dollar has pushed the price of metals up to record highs. Rumours are abundant in the mining sector of potential mergers and acquisitions after the World's largest mining group BHP Billiton audaciously bid for the World's third biggest mining group Rio Tinto causing a barrage of potential mining group consolidations. Adding further to the miner's gains. In 2008 we expect many of these rumours will become reality and we expect another strong year for mining stocks, as do our clients at BetsForTraders with an astounding 81.3% currently long mining group Rio Tinto, this is the strongest sentiment ever experienced on this stock.
Looking at the BetsForTraders Sentiment Index we saw that our clients were not optimistic at all going into the New Year. The BetsForTraders Sentiment Index sat just below 30 for a long period of time and as we began 2008 the markets crashed just like the index had been predicting.
The Sentiment Index enables one to see at a macro level trader's sentiment for the equity markets. With 50 being normal (equal volume of long / short bets) and 100 indicating that 100% of all bets placed are on the stock markets to rise. The current level of 35 indicates that BetsForTraders's clients are remaining bearish during the first few months of the year.
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