Market Reaction can be a Fickle Mistress
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Market Reaction can be a Fickle Mistress

Market Reaction can be a Fickle Mistress


Trading Features / Strategies from Simon Denham of Capital Spreads.

The paucity of policy coming from the higher echelons of our political masters is making rather a mockery of the term Democracy.

With virtually every piece of nasty medicine now consigned to the back of the dispensary the country can look forward to two or three years of drift as the incumbent administration looks to mitigate its current disastrous low in the polls. Out of the window has gone the ‘golden rule’, which has always been seen as something of a joke anyway. Sustainable lending over the economic cycle would have meant that in good times that debt was actually falling to build up a war chest for later.

Poor old Captain Darling is now left with a wallet full of moths and IOUs. It now appears that any extra cash will be leapt upon by the Unions on behalf of their members (and who can blame them in the face of such a sustained attack on spending power).

On the basis that misery loves company the only bright spot is that many countries are doing just as badly as the UK so at least the Pound has other weak currencies to hold hands with.

This morning we have the fun of Vodaphone, Enterprise Inns, Portland Estates, SCi and Severn Trent giving out trading statements.


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Vodafone is at the bottom of expectations with FY revenue expectations now down at a miserly £40bn! The stock is a pretty big segment of the FTSE 100 so the opening level (which was already called down 40 points) might be even worse.

Enterprise Inns started their statement with a series of downers (supermarket policy, consumer confidence, costs of recovery, beer sales subdued) and then finishes off with a statement saying that business models remain robust and even more startlingly an uplift in Real Estate valuations. The last valuation must have been done a while ago.

SCi is reporting that the full year loss will be ‘no more than’ £100m on revenues of just £134m. Enough said. Portland is reporting that it expects economic outlook to deteriorate but is still reporting an increase in rental income in Q1. Net Asset Values are down some 16% YOY and the forecast for the rest of the year is for softening demand on occupation.

And finally Severn Trent who managed somehow to avoid a huge fine for misreporting water leaks etc a few years ago has reported rising sales of over 5% but a reducing demand.

If IG Group’s woes yesterday are anything to go by success is in itself a problem these days as, after reporting a profit surge of 41%, the stock fell 12%. All the markets could concentrate on was an up-tick in bad debt (hardly surprising in the current environment) to the heady heights of 2.2% of revenue! One wonders what would have happened if they had reported earning lower than forecast. On this basis the crop of stocks reporting today could be in for a torrid time!

But as many analysts will say financial market reaction can be a fickle mistress.



The above comments do not constitute investment advice and neither Capital Spreads nor Clean Financial accept any responsibility for any use that may be made of them.


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Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

Article provided / approved by Capital Spreads which is a trading name of London Capital Group Ltd which is authorised and regulated by the Financial Services Authority (FSA), FSA Register number 182110.

'Market Reaction can be a Fickle Mistress' edited by SD, updated 22-Jul-08



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