Betfair Official Blog

Daily View - 5th February

America sneezes, we catch a cold. Hang on a sec...

Dealers were in a quieter frame of mind yesterday, as the recent wild swings finally seemed to run their course. And in gazing into the (rather foggy) crystal ball in front of me, it is difficult to predict what will crawl out of the woodwork next.

The news has seemed so unremittingly bad that sometimes you have to step back and wonder whether we are all just getting too negative for our own good. Yes the 'sub-prime' problems leading onto the 'credit crunch' issues giving rise to 'growth' worries blah blah blah, are real issues, but how big and how important are two questions nobody truly knows the answer to.

The US is suffering because house prices became a get-rich-quick route in a country that has one major product in abundance - land. In the UK (although there are a few 100% plus mortgages), most loans are well covered and the value of the asset, the house, will almost certainly cover most of the debt anyway. Hence the risk to the bank is just the interest. In the States, with so much available building land, the potential for wild swings in house valuations is that much greater. If the lenders are handed back the keys on too many properties that are worth just 75 to 80% of the initial loan, the footsteps you will begin to hear are a Mr Crisis pacing up and down in the wings. And that is why the employment numbers in the states are being watched with such trepidation - a further weakening in job prospects will cause more bad loans and more banking crises.

Today the FTSE is called to come in some 20 lower at around the 6000 level (a nice round number for us all to focus on). The resistance mentioned yesterday at 6060 held quite nicely throughout the morning and punters had a profitable time selling on every up tick and buying back on the re-tracements. There seems to be some reluctance to sell below the psychological 6000 level this morning and our clients are closing out shorts in hopes of a continuation of the recent move higher. We bounced three times yesterday (through the whole trading session) from the 5995 level and so this will be the early focus for day traders.

FX markets look to be quiet as well this morning after the Pound managed to claw back half of Friday's losses vs the dollar. We are building a tight trading range between 1.9550 and 1.9950 and this may dominate trading over the coming days.

Gold slipped again yesterday and spent much of the session under $900 before rallying towards the close to finish at around $905. This morning, the sellers are in force again and we are back down to 901.5-902.0 but punters are quick (as always) to buy on any weakness. The failure to close below 900 may be taken as encouragement for the bulls but there seems to be a lack of positive impetus at the moment and dealers will be looking at any failure to build on prices as a negative.