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BT's financials are looking better than their staff numbers

Daily View - 13th November 2008

Walking in this morning it is difficult to think of anything apart from doom and despair. Companies are releasing ever larger numbers of staff, the pound looks like I might be using fivers to wallpaper my bathroom anytime now, and oil, gold, bonds, shares etc are all a sea of red on my monitors. And worse, I read this morning that the value of fine wines has dropped by up to 65pc "quelle horreur", things must be really bad.

My musings earlier in the week about the effect of low Oil prices on Russia's financial viability was not meant as an imminent warning, just as a thought on what might be in store. The news over the past few days has put this 'possible' into the 'probable' pigeon hole. This might not be seen as having much impact on the UK but it is an indication of what is going on across the globe. Britain is not the biggest exporter on the planet but we are still sizeable. Slowing demand on this scale means that the gains for industry from the crumbling pound are not being realised on order books and so all we will do is, once again, start to import possible inflationary pressure.

Not only this but with virtually every white goods, clothing, electrical and furniture retailer on the block importing its merchandise the outlook for margins on the high street just get worse and worse. Falling demand from an economic slowdown is part of every businesses road map in tough times but adding to this with huge increases in acquiring the produce to sell, with no way of passing it on to buyers, is not. I fear that the recent bounce in retail stocks might be about to run aground.

The FTSE is reacting to the fall in the US and in the Far East overnight with an opening quote of around 4080 down 100 on yesterday's close but we are seeing strong initial buying from clients who (as mentioned yesterday) seem to be willing to buy into any weakness at the moment. With the pound so weak, and the fact that 70pc of the FTSE 100 business is non-UK, equities do look to be good value on a global scale. The problem is, will they be even better value tomorrow? As I have stated, ad-nauseam, sitting on your hands continues to be the best policy. If you must trade make sure that the reward potential is commensurate with the current risk level.

Oil is now very close to $50 with Dec Brent trading at 51.00-51.05, a far cry from the 147 bucks of spring, and as feared in yesterday mornings' comment the acceleration to the downside seems to be getting worse. Just since the start of the month oil has fallen over 14 dollars or 22pc. Whilst we might cheer from the sidelines as the pressure on our wallets decreases this is, in the long run, another possible indication that global growth is not just slowing but actually putting the emergency brakes on as well.

Gold made a new closing low for the year last night at around $710.0 but has been down at 680 intraday back in October. There seems to be buying support below 710 but the rallies of late October and early November all seemed to peter out at successively lower levels. The support from the 2007 $690 resistance level must be seen as critical and any close below here may well indicate a further shift down to the 635-640 '07 support.

BT's numbers were much better than feared and rather beg the question as to why they felt it necessary to make such a bearish statement a couple of weeks ago. In a poor market the stock is trading up more than 10pc and our clients are very pleased indeed having bought into the stock whenever it approached 115p.

Once again it is time to put the tin hat on and hunker down. Come out in Spring!

The Tradefair Spread Betting Team