Daily Financial Analysis / Simon Denham / 17 April 2009 / Leave a comment

Daily Comment Friday 17th April

The FTSE and Dax have made a valiant effort over the last few trading sessions to break into new ground but it must be admitted that it has been pretty tough going. Yesterday's session was a slow grind higher throughout the day after an initial move lower (for some obscure reason) threatened to spoil the tea party. We are now up at around 4065 in the FTSE and 4620 in the Dax. The German index is now back at levels not seen since early Feb and the FTSE might be looking at beating the last aborted rally of earlier this month. For all of the sound and fury in the political arena and the fact that there is a budget next week the fact remains that trading is very restricted for the indices with the 100 index stuck between 3850 and 4100 for most of this month.

It would be a leap of faith now to suppose that everything is rosy in the garden and we can look forward to a big rally in the coming months. Punters continue to disbelieve any move in either direction and we have seen extensive selling all through last nights US rally and in early action this morning. In truth it is difficult to argue with this thinking as each piece of economic news seems to cancel out the last leaving investors in a Limbo of uncertainty.

Watching Banking stocks over the last few weeks you would be forgiven for thinking that we were in the midst of the biggest bull run of all time. Barclays has more than quadrupled since early March, Lloyds has almost trebled and RBS doubled. Other popular stock has also done rather well since the start of March with M&S almost 50pc higher and Rio also putting on a plus 50pc move. In fact it is almost surprising to see the FTSE only some 18pc from the lows.

It seems that the market is actually starting to believe Mr Diamond's statements now with Barclays up another 5 or 6 p this morning and our belief (from back in Feb) that the auditors would hardly have signed off the accounts, in the current environment, if there was anything smelly seems to be being borne out. There is still a lot of fresh air above the current price although the stock dilution makes progress above 240 (approximately) problematic in the medium term.

Dealers will continue to oppose break outs in virtually every asset class until some clarity on the effects of the huge liquidity injection is seen. While we all hope that the effort works there is still the fear that it will not. With employment levels still under pressure there will be a natural caution from consumers to pull in their horns throughout 2009 and possibly into 2010. With the momentum of the slowing global economy colliding with the desperate attempts to boost growth and the powers that be almost making up economic theory as they go along the game is still too close to call.

Gold slipped in the equity rally as we have come to expect these days but once again there seems to be little in the way of follow through. While the yellow metal was unable to regain the 900 level over the last few days it is also finding it difficult to probe below 870. Punters have been buying quite strongly and are sitting on poor positions at the moment but with no break lower they still appear to be confident of a return to higher levels. A close below 865 will probably chase the buyers out but the short term falling trend line is now at 892 and bulls will be pushing for this.

Sterling has rejected the 1.4950 to 1.5000 level once again and this makes it the forth failure since the 16th Jan to trade and hold above the mark. Whilst the overall momentum for the pound does seem to have turned slightly favourable it should be recognised that the repeated inability to regain recently (last year) lost ground is not encouraging. Fortunately for Sterling bulls the euro also seems to be falling slightly out of favour against the dollar (as mentioned many times over the last few weeks) so the GBP/EUR recovery remains in place, although we seem to be pausing for breath just for the moment.

Since managing to get back to the 50 buck level Oil has rather fallen off the radar since mid March and the trading ranges for the last two weeks sessions has merely traded and retraded the same prices. At 52.85 (June brent) the market looks poised for a move in either direction but dealers will probably await some indication before getting too heavily involved. At least the huge sell offs in the run up to expiry seem to have stopped with the May contract which might indicate that surplus stocks are being whitled away.