Yet another week of two way action but plenty of corporate news to act on
22/02/2008
15th February - It's still a good two-way market out there The feeling overnight was the shares in London would see a big fall today after the Dow Jones Index reacted badly to Ben Bernanke's downbeat comments on the US economy yesterday. The FTSE 100 index though has been quite strong so far showing a 30 point gain. The miners are at the forefront with Vedanta Resources, BHP Billiton and Kazakhmys leading the pack. On the downside, a third day of falls has seen Alliance & Leicester down another 3% as traders run for cover ahead of another round of write-downs in the bank sector, for which the majors report next week. The biggest all-share mover was Go-Ahead Group which handed out today's profit warning. It said that whilst half year revenues rose, profits slipped as it said the bus division could be affected by increased fuel costs, while in rail reduced subsidies and increased profit share were expected to result in a full year operating profit below last year. There is no hiding place for these sorts of statements, and the shares were down 14% mid-morning.
The only other results of note came from Tate and Lyle, which were also somewhat downbeat. It said that pre-tax profit for the four months to 31st January was marginally ahead of expectations, but the EU sugar market was expected to remain difficult. Normally, the shares would have fallen here too, but traders are more interested in stakebuilding activity and the company remains a clear bid favourite, with a rise of 2% so far. 18th February - Footsie storms ahead on positive press comment on financials The financials certainly hold the key to the short term performance of the FTSE 100 index at the moment with a big week ahead for reports. After a nasty sell off again on Friday, there was a glimmer of hope over the weekend as the Sunday Times picked up a story that Barclays and Lloyds TSB would raise their dividend payments when they report tomorrow and Friday respectively. If so, it would send a message out that they feel their balance sheets are well underpinned, and CFD traders are anticipating a potential big move up here. We remain very cautious, and want to wait for the figures before looking to go long, but the major banks are up by around 3% so far. This has pushed the index up a hefty 103 points mid-morning, so as we keep saying you simply cannot write off the bulls despite the chorus of bear market comment from commentators. This is of little consolation to holders of Northern Rock shares which were suspended today as the government looks to introduce a bill enabling the bank to be brought into state ownership. Anyone holding shorts may have to rein in their excitement as it could be some weeks before a valuation is agreed, but it looks highly likely that shareholders will feel highly aggrieved as their needs will be far behind the desire to limit the political fallout. Elsewhere, it is quiet and with US markets closed for Presidents day, we can expect the Footsie to drift back later in the session.
19th February - Plenty of results to keep traders busy today It has been a morning for day traders so far with the FTSE 100 index seeing some rapid moves in both directions, and the focus has been on a varied and interesting set of corporate statements from market big hitters. After yesterday's big rallies, a more sober view of the bank sector was taken today with solid figures from Barclays offset by more writedowns at Credit Suisse. As predicted in the Sunday press, Barclays saw profits for the year come in slightly lower compared to last year but it signalled its confidence in the future by raising the dividend by 10%. Nevertheless, there was an early 3% markdown, with a tussle between value buyers and committed bears of the sector. Once again, there was disappointment at Cadbury Schweppes, which missed forecasts with a fall in pre-tax profits for 2007, though it reiterated its goal of delivering mid-teens margins by 2011. Another bear point was the ongoing demerger, which is struggling against the background of tighter credit, and shareholders now seem unlikely to benefit, so the short term outlook is bearish, and the shares were down over 5% mid-morning. There were no other major surprises from Scottish & Newcastle and Intercontinental Hotels with their figures, and it was left to the miners to prop up the market yet again as commodity prices continue to move up steadily, and that it the one bright area in what is still a very volatile market. 20th February - Alliance & Leicester does the reverse of Barclay's yesterday The market was set alight yesterday morning after Barclay's pleased the market, but it was the opposite story at Alliance and Leicester today after a very poor set of figures. The shares fell another 15% after it announced a 30% fall in profits with a nasty £185m write-down against the value of its debt-backed investments following the credit crunch. There was more gloom with a warning that the net interest margin would be impacted due to higher funding costs, and the outlook remains grim to say the least.
Elsewhere, the big news was crude oil hitting $100 overnight, and this raised further concerns on its impact on economic growth with the FTSE 100 index down 65 points mid-morning. There were plenty more corporate results to examine, and the stand out statement came from Rexam. Although full year profits were impacted by high aluminium and other input costs, it said it expected to return to profits growth in 2008, and value investors piled in. There was also an solid set of figures from Anglo American with operating profit for the year up 3% and underlying earnings up 5%, but an element of profit taking appeared after the recent strong run.
All in all we are still seeing plenty of two-way business, and with the current trading range in place, CFD traders can expect plenty more volatility in today's session. 21st February - A busy day for news as two way action continues The benefits of CFDs are clear for all to see at the moment as there has been plenty for the longs and shorts all week. After yesterday's big opening fall at Alliance & Leicester, there was a big mark up at Reed Elsevier after it said it was targeting cost savings of £245m over 2008 to 2011. Of more interest though was some M&A activity with the purchase of US insurance data firm Choicepoint for £2.1bn in cash and plans to divest its trade magazine business as part of a major restructuring programme. Traders liked the strategy and the shares were up 4% mid-morning, so if this holds, it turns the trend bullish here for the first time in two months. A&L was in fact today's worst performer after yesterday's figures, with a string of brokers lowering their price targets for the stock, but it could be argued that the worst may now be over for the shares, and if we see a retest of yesterday's low point around 430p, longer term buyers might just wish to have a nibble.
Elsewhere, Kingfisher reported a 5.1% fall in Q4 retail sales but the shares edged up after it said it expected underlying pre-tax profits for the full year to be in line with expectations. BAe Systems was a good market after it said it performed well in 2007 as it saw all four of its business sectors deliver growth helping profits come in line with expectations. Another share to watch is Scottish & Newcastle, which is down after it emerged after the close yesterday that SABMiller has ended weeks of secret talks with the brewer. This is one perhaps for the arbitrageurs if there is any further weakness.
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