Betfair Official Blog

Daily View - 14th February

The changing face of the global economy. It now frowns at us...

Overnight, the Nikkei has advanced some 500 points after Japanese growth (far from edging towards recession as was feared) came in at double the economists' estimates at 3.7% annualised in the fourth quarter. With analysts expecting growth to be around 1.7%, the question must be asked as to how, with such a massive source of data, the statisticians with all their wonderful models to play with can have managed to get it so wrong. An entire economy is like a massive super-tanker whose momentum takes an enormous amount of time and space to turn in another direction. Alterations of this magnitude should have shown up in shipping volumes, credit facility increases or just general board room chit-chat.

The increase looks to have come from the expansion of the Asian and Russian market place, as Japanese exporters look for other regions to pick up the baton from the tiring North American and European consumer. Unfortunately, whilst Europe and the UK still appear to be very reliant on US growth, the rest of the world is moving ever further away from the American mall. The Chinese have been cosying up to the African nations in attempts to secure their resource supply lines, whilst elsewhere, Australia's exporters are now more dependent on the emerging markets than on Europe or the US. It is no coincidence that the Aussie unemployment rate fell to its lowest level since 1974 this morning, as demand from its mining sector continued to power the economy. Indian growth is also showing few signs of slacking

The real fear is that we may have reached a pivotal point where the accumulated wealth of the developed economies is no longer enough to keep growth on track. Will demand (not supply) from the emerging markets become the deciding factor in the years to come?

Today we are calling the FTSE to open back up at Tuesday's closing level at 5915-5916, as all the rushing about of yesterday came to a plate of beans in the end. This weeks price activity in the FTSE 100 index has been quite comforting as every attempt to take us lower has failed at a higher and higher price. This is a very general indication of a bull market move, and although it is only over a four day period, is giving our clients some confidence that the recent dark days may be drawing to a close for the time being. Do not be deceived though - the bears have not gone away and the overall momentum is still to the downside. The sharp falls have been getting worse over the past six months and we are still very vulnerable to a change in sentiment.

The pound has gained slightly over the past few days vs both the dollar and euro which has given it a double whammy against the yen, pushing prices from 208.35 to the current 212.70-212.78. The previous move higher failed in the high 213s, and the daily trend lines are showing strong resistance higher at 216.50 to 217.00.

Gold bounced neatly off the support level mentioned in yesterdays comment at 895, and is now at 908.5-909.0. The recent strength of the dollar against the yen has probably held it back to some extent, but the fact remains that we continue to have an almightly battle around the $900 level.