Betfair Official Blog

Bear Sterns: Gone but Forgotten

Daily View - 19th March

Markets continue to whistle around as we digest the latest Fed-led rally in the States. Since mid-January we have had five rallies on the back of Fed initiative (two liquidity injections and three rate-cuts) which have all caused major moves to the upside on their respective announcements. In between times, the direction has been singularly grim. If we remove the Fed-inspired rallies, down days have outnumbered the good ones by two to one since the turn of the year.

Oddly enough, the net effect has not been as bad as one might have expected. For all the pain felt by many across the financial landscape, the US markets are actually just 10% off the close at the end of 2007, and pretty much unchanged from the end of 2006.

The FTSE is also almost exactly where we started from at the back end of '06. Yes, the western world might be entering a period of slow or even negative growth, but the equity markets have not (in the main) shown a great deal of evidence that investors are overly concerned. This is not what we would normally consider to be recessionary equity market activity. To date there has not been a 'broad' market retreat, and it is this possibility which might now be worrying the various Treasury departments in the UK and the US.

The FTSE managed to reverse the entire 200 point fall of Monday with a 200 point rally yesterday. This morning, after the US markets managed to climb throughout the evening session, we are opening 35 higher at around 5640.

The Dollar which had managed a bit of a rally yesterday after the Fed announcement, is giving it all back again this morning. This is causing a bit of a move higher again in Gold as the yellow metal strives to recover from the vicious sell-off over the past two days. Highs to lows in Gold from Monday morning to yesterday evening were some $60, and we can anticipate that there were some nasty hangovers from weak buyers who were coming in late to the commodities party.

If we were coming into work this morning having fallen asleep on Friday night, we might be wandering what all the fuss was about.