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In Darling we trust

Daily View - 10th April...

With oil and other essential commodities continuing to rise as the pound continues to depreciate, it is tempting to suggest that the markets seem to be rather sanguine as to the profits expected from many 'front-line' corporates. As the CEO of Carrefour (after Wal Mart the biggest retailer in the world) warned, the continuing squeeze on margins is becoming very hard to accommodate.

Of course some 70% of FTSE100 stock income is from foreign earnings, but even here a large proportion is in Dollars, which itself has only been marginally stronger than Sterling. The preponderance of mining, tobacco and oil companies in the index is helping to offset the falls in Banking and Retailers - it must be pointed out that if the remainder of the index had matched the falls in these two sectors we would be 2000 points lower!

In the midst of all this turmoil the IMF states that the UK is particularly exposed to the current crisis. The exact opposite to Captain Darling who stated (without much evidence) that the UK was better prepared to ride out any economic downturn than the other G7 nations. Who do we believe?

Oddly enough, for all of the insults heaped on the Treasury forecasts over the past years, they have been the most consistently correct over recent years. The IMF on the other hand, the most consistently incorrect! This time however the boot is almost certainly on the other foot - a whole host of factors are combining to build a massive brick wall on the highway of continued growth.

Today we see the FTSE holding on to the gains of the past week or so, as the opening levels have us up close to the 6000 level. We have now spent four sessions in a tight trading range, and looking back over the past months this kind of contraction has always been the precursor to a big move. Our punters are positioning themselves for this move to be to the downside, but the probability may be for a spike higher as a continuation of the recent trend.

My hope that the big commodity bull run might be easing has been dealt a cruel blow by the rise and rise of the oil price. Whilst precious metals are still well off their highs, energy and base metals are pushing the envelope again. And whilst we may be complaining about the cost in the UK, pity the weaker nations who do not have the fat to absorb the latest price hikes.