Strange FTSE Move and Bank Deposits
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Strange FTSE Move and Bank Deposits

Strange FTSE Move and Bank Deposits


Trading Features / Strategies from Simon Denham of Capital Spreads.

Off to the races again and the going does not look like easing one jot for the time being.

The late rally in the FTSE 100 futures after the close of the cash markets seems to have been one of those strange moves that make no sense when you walk in the next day. Whilst the cash market closed at 4960 at 16.30 the futures then proceeded to add another 110 points in the early evening session.

This morning? And the quote is once again back at 4960 as the world nervously awaits the House of Representatives vote this evening. Even if the vote goes through (much better likelihood but still not definite) the fact remains that this is a ‘last chance saloon’ moment. There is not much more in the Fed’s armoury aside from nationalisation and it will take some considerable time before the actual implementation occurs. Some banks are living day to day with Money Market access getting ever weaker but even so they may have to go to share holders for permission to access the TARP facility as it will involve dilution of shareholder value.


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My best guess is that, for those looking to invest at the low levels, it is still advisable to sit on your hands for a while longer until there is better visibility of future trends. The bears are still in control and it would be foolish to commit too much at this juncture. Having said that, most bear markets end on one big blowout day and last Monday could justifiably be said to (at this point) resemble just such an event.

The betting is that the Government will raise the protection from £35K to £50K on depositors. Once again, demonstrating their complete lack of comprehension over the problems facing the banking industry. The £35k protection did not save Northern Rock from people with as little as a few hundred pounds queuing round the block. What kills banks is the removal of much larger sums (on which there is no protection). A company with £50m cash sitting in a treasury account with a failing bank would have no protection at all. So what does a prudent Finance Director do? He moves the money from any bank with perceived weakness to stronger units. This is what killed off HBOS not small depositors removing cash. The Irish Government has announced that every single penny deposited with an Irish bank is now given a government guarantee. With this pathetic announcement due from our ‘Great Leader’ it does not take a great leap of fantasy to see that even banks such as RBS and Barclays may suffer dwindling deposits as customers move funds to safer havens.

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.

'Strange FTSE Move and Bank Deposits' edited by SD, updated 02-Oct-08



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