Betfair Official Blog

Daily View - 12th February

City 'analysts' drip with excitement as CPI numbers are released...

No doubt tomorrow's newspaper men and women will claim to be shocked by this morning's tip-top UK Producer Input and Output prices, and the CPI numbers out today at 9.30am. Forgive me for looking beyond the headlines for a minute; base metals - double, oil - double, wheat - treble, corn - blah blah blah. On the other side of course, Sterling is now lower than a year ago, for the first time since Jun 2006.

With money growth (M4) in the region of 12% (as it has been now for several years), we should be surprised that inflation is not at much more frightening levels. Sensible folk may wish to divert their gaze away from the blunt instrument of interest rates, instead towards the nail studded club of tighter money supply. Of course the credit crunch may turn all our heads for us!

This morning the FTSE looks to be reversing yesterday's falls as we call the market 50 points up on the off at 5755-5756. This means that we have bounced off the 5700 level once more and this support will become increasingly important. Of course, this is something of a double-edged sword as, although it will give buyers some confidence to come in and pick up a bit of stock, it also gives the bears a target that is quite close, to attack. The weakness was most evident in the banking stocks once again, and the reduction in capital values of the financial sector might become a cause for concern as the economy tries to climb out of the current slowing effect of the credit crunch, not to mention the raw-material-inspired inflationary spiral.

Sterling is also holding on to the recent lows with more buying in the low 1.94's inspired by the hope that the BOE will keep rates high. The Euro made an abortive attempt (just before yesterday's inflation number came out) to break above 0.75 level vs the pound, but this was swiftly smashed back on the release and for the time being traders are likely to be nervous of being the first ones to buy above 0.7500.

Oil continues to rush around, and my hopes that with winter out of the way and a slower world growth scenario on the horizon, we might be drawn back from the brink of permanently higher prices, appears premature! In two and a half trading sessions, March Brent managed to rally almost eight bucks as traders failed once more to break through the 86.25 to 86.50 support levels. The market has now bounced (strongly) four times from this level and it is beginning to look a very tough nut to crack. This morning we open at 93.21-93.26 in very quiet activity.