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Arguments over Northern Rock are generating more heat than light

Daily View - 19th February

So I'm heading back to the 'real' world, away from the petty games of politicians, and the barmy ramblings of the Harrods owner. Or is it the other way round.

Markets seem poised for any type of news at the moment as the rumour of an increased dividend from Barclay's and Lloyd's banks launched the bulls into an orgy of buying. The rally in the FTSE of 159 points was a welcome fillip to dealers who had feared that the fall on Friday might presage another collapse as, with the US away on yet another bank holiday, the scene might have been set for a replay of the last stateside vacation on Jan 21st. In the event, even the S&P futures managed, at one point, to trade some 20 points higher which will not please Stateside traders, as they will have missed out on the fun.

Early calls are for the markets to give up some 35 points of yesterdays move on the open and come in at around 5910-5911. The Far East failed to give a further boost to the bulls, which is slightly disappointing but hardly surprising. We are still in a sort of limbo as to how the banking crisis will affect the overall wellbeing of not just the UK, but also the global economies. This will continue to show itself in wildly volatile markets, on occasion, as fear or greed gain the temporary ascendancy.

Barclays have come in much as expected but Cadburys and Scottish & Newcastle have missed estimates by a mile. S&N even managed a loss (mainly on a one-off charge) against expectations of a profit of around 280m (which will not help their defence against Carlsberg.) If the 'retail' sector of the FTSE is starting to look weak then we could be in for some tough times.

Versus the Euro we are not doing so well (once more) as the pound trades above the 0.75 level again. Continued probing up here raises the fear that a break out could take us significantly lower. Traders will be watching resistance at 0.7545 and then (if broken) 0.7600. The downward trend, in place since early September, shows no signs of reversing and as currency traders are want to say, 'the trend is your friend'. The current price at 0.7540-0.7542 puts us just under the lower resistance level and will be tempting a few day-traders in.