Financial Market Comment 30th June 2009

Markets have been quiet in the past but this morning is almost something different.

In two hours of trading the FTSE has managed to excite absolutely nobody at all after the
Dow and S&P went into deep freeze yesterday evening. With volumes draining away as dealers head off to the beach there is a good chance that the current moribund conditions will continue for quite some time. Watching the charts is rather a frustrating pastime as even small moves look huge due to lack of any major scale with which to compare. The major UK index has now been stuck in a 100 point range for seven sessions and (in truth) today does not exactly look like changing matters.

One ray of hope (for some interest) is that the Pound has gone for broke this morning and busted straight out of the recent trading ranges. The 07.00 to 09.00 (UK time) trading period is becoming quite interesting as Europeans turn on their screens and hammer the market one way or the other. The high this morning at 1.6742 has been opposed quite strongly since it was hit at 07.21 this morning and we have slipped back to 1.6650ish with punters getting heavily short all the way up. Those who have dealt with sufficient margin to avoid being stopped out on the way up may be hoping for a nice price correction back into the 1.6200 to 1.6550 trading range but if we do not get back down there today the chances of a new range being set up are quite strong.

Barclays continues to attract investors and the stock is back up to 289p having failed to challenge the support at 255 a few days ago. There have been many comments in support of Lloyds/HBOS over recent days but it must be noted that Barclays is in an infinitely better position than the UK fixated behemoth. The Lloyds group still has an enormous small to medium sized corporate loan book and this is unlikely to start improving for many, many months to come. Punters continue to pile into single equities (banks included) and are heavily long of virtually everything. With the prospect (if inflation does not raise its head) of interest rates being down here for some years to come the temptation to search out return via the equity markets is very strong indeed but it must be recognised that the capital value of much of the corporate assets of the FTSE 100 components is also under pressure. While the bear or bull arguments are quite well known and well balanced the betting seems to be heavily in favour of a move to the upside.

Dealers made a killing yesterday on the move higher in the indices, gold, oil etc etc as the early weakness failed to make any headway at all. Punters have been quick to take profits though and for the most part (except for sterling where sellers are in evidence) have flattened books to see which way the wind blows this time.

Oil as mentioned has moved higher once again to the top of the trading range just south of 72 bucks. We have been here a three times already in the last month all to no avail. While I am not an oil bear I see no reason for this move higher to prove any more successful than the previous three and obviously many punters feel the same way with heavy selling on the off this morning when we were above 72.50. The current price at 71.75 is an initial pull back but we may see another attempt to break higher today as the US opens. If we fail to make headway there may be a sell off in the evening session as profit taking comes to the fore. As with all the markets we need to see reasonable momentum to break out of the ranges, any weakening of resolve and “back we go” into the trading ranges

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Simon Denham is COO of London Capital Group and Capital Spreads. We do not endorse the information and analysis available in this comment and it is provided purely for information purposes only and is delivered as a personal view by the writer. Under no circumstances is the information in this comment to be used or considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. The investments referred to herein may not be suitable investments for all persons accessing this page. You should carefully consider whether all or any of these are suitable investments for you and if in any doubt consult an independent adviser. We accept no liability whatsoever for any direct or consequential loss arising from use of the information on this web page. Please see our Terms and Conditions.

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