The companies reporting over the last few weeks have generally come in on the disappointing side but with stock prices so hammered already this is failing to have much of an impact on the index as a whole. Vodaphone aside, the individual companies involved are taking major hits with many being hit by up to 20%. Having said that, connected sector stock sometimes takes little notice.
For all of my bearishness over the past year or so the fact that bad news is now not being acted on would seem to indicate that, for the moment, a base has been reached. Markets have a habit of building up for the end of the year as cash is found a home and with some very tempting targets out there it would not surprise if the same happened this time around. Of course there are still some very smelly hurdles still to be jumped not least the ongoing liquidity crisis.
3 month money remains some 150 basis points above base rates as banks struggle to attract funds from the big cash holders. And here I do not mean Joe Public. A vast percentage of the world’s liquidity is held by a tiny percentage of its population and an even tinier number of institutions. It is these people (both individually and corporately) who must be tempted to risk their money with the banks.
For all the hullabaloo over the State stake building in the banking sector there is still no guarantee over personal deposits. How many uber-wealthy individuals would risk their all on the credit-worthiness of RBS or HBOS?
Company UpdatesSainsburys have come in with disappointing turnover and profit numbers. Although ‘disappointing’ seems hardly the word to use when the numbers are still well up on last time. The stock remains ‘in play’ due to the Middle East interest but without this it would (even after falling over 50%) be expensive versus its peers.
British Land have released numbers showing a trading profit but a massive asset write down. Unfortunately after the Taylor Wimpey private home numbers yesterday the commercial sector is not expected to be anything other than a wasteland. If the rest of the UK is anything like the City at the moment there also appears to be a huge slug of new capacity just about to land in the market. The Lord alone knows who is going to take it all up. This will almost certainly continue to drive revenue numbers lower.
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'Market Liquidity, Sainsbury and British Land' edited by DB, updated 12-Nov-08
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