Capital Spreads MD Simon Dehham contributes a daily market commentary

Markets have now neatly reversed the falls of Monday and in some cases are significantly higher than the closing levels just before the weekend.

Far Eastern market recovered their poise after the nervy monday session and funds continue to pile into Chinese, Hong Kong and Indian equities with the Hang Seng managing a 1000 (!!) point rally and the Bombay Sensex up almost 700.Both well over 3% up on the day.

The FTSE is opening some 45 points to the good on the off at just over 6500 (6505-6506 as I write) and has bounced strongly off the support mentioned yesterday at 6400. As mentioned the 6400 and 6500 levels have proved to be both something of supports and resistances and punters who went home long last night have been taking profits on the open this morning. Yesterday started off on the bloody side for our clients but as the day wore on longs who held their nerve were rewarded. If we stay above 6500 fro a while this morning there is a good possibility of buyers coming back again but punters are understandably twitchy about any direction just now.

The Americans did what they normally do when the Europeans make a big bear move on their markets..trade in the other direction. US market do not mind going down but they always seem to hate it when the movement occurs outside of US trading times. If all a trader ever did was wait for the few times a year when the Dow was called more than 100 pips lower in UK morning sessions and then buy I feel that their win to loss ration would be very sweet indeed!! The US markets are called higher again this morning at 13593-13597 inthe Dow and 1508.9-1509.3 for the S&P (above 1500 once more) and with credit worries 'apparently' rising again equity markets might seem to be the second safest place to be (cash being number one! )

I say credit markets are 'apparently' being squeezed because the newspapers are full of it this morning. Unfortunately for all these column inches the Short Sterling and Euribor contracts do not bear this out as the front month december contract is pretty much where it has been for the last month. With the big US banks trying to set up this rinky dink vehicle for distressed debt we may be seeing some talking down of asset values so that they can be picked up at truly sparkling levels.

Debenhams have produced a profit increase of 13% on like for like sales down by 5% and margins down by 0.9%(?!?) They have acheived this by the adition of almost 800,000 sq ft of new floor space. The shares are now well above the lows of September of around 84p and are sunning themselves at 108.1-109.2 up 5.5p this morning. Our clients have been short this stock for a very long time and seem no closer to cutting out and after the last year who can blame them. With problems still on the horizon this is still a specualtive recovery play.

S&N's defensive language is hardly likely to win friends and influence people. Calling a partner (albeit one who wants to take you over) 'incompetent' and 'dishonourable' takes financial briefings to a new level. The Stock is still stuck around the 750 level at 764.1-765.4 as investors ponder the chances of a competitor approach. The big stock holders will not want to miss out on a potential windfall so the S&N board must make its best efforts to drive up the stock, I would be surprised if being gratuitously rude is going to acheive this effect.

On the FX front cable traded virtually the entire range, mentioned many time over the past few weeks (2.0250 to 2.0500), in one day. We have now confirmed this range quite dramatically and our clients were happy to sit on the shorts built up on Friday and Monday morning. We are now attempting to emulate the price action on the 4th, 9th, 12th and 17th of this month as the charts show an almost perfect pattern for four days. If this time is the same we may see the markets climb to 2.0430/50 if this bounce is merely a mirage then we still have to get back below strong support at 2.0300 and (of course) 2.0250 before the bears came out to play.

As feared yesterday Gold ran into a bit of a problem as weak late comming bulls, tempted by talk of $1000 an oz, were driven out of positions as the price dived by, at one point, $20. Oddly enough it fell neatly down to the support level mentioned yesterday at 745 before finding buyers once more and recovering to the mid 750's. Who says you never read anything useful! We are now struggling to get above the 756 resistance level and a failure to clear this point may bring sellers out again. Punters are (as ever) still long but seemingly not so confident as in recent times