Betfair Official Blog

Probably the worst figures of the month

Daily View - 7th May...

Markets today are likely to open slightly to the good as the short squeeze continues to bite. Whilst the FTSE 100 has managed to break above the post-January highs, the FTSE 250 is still just below the peaks of the rallies in Feb and March. The high in February was 10385, and in March, 10335 - the current price is at 10289-10309 having rallied some 250 points since the end of April. If the index can break above 10400, and stay there, then the squeeze in the main indices is likely to continue but if we fail in the junior index then the senior partner may well struggle to make much headway above the 6250 price level.

The unexpected loss reported by Carlsberg this morning might rattle a few nerves however. The reasons given were higher marketing, energy and distribution costs. Marketing is obviously a huge slice of 'probably the best lager in the world's' expenditure but the hikes in energy and fuel-related distribution will be worrying analysts across a swathe of sectors. If this hit to margins is replicated across the board, the reporting season could be a bit grimmer than expected.

Speaking of which, it never rains but it pours for old UBS. Hard on the heels of the debacle over sub-prime asset write-downs, comes the news that their much-vaunted wealth management unit in the US is being investigated for the period 2000-2007 over advice given to US citizens. In a sort of double whammy, they are also on the receiving end of a good going over by the Germans over alleged advice, telling clients to actually hide funds from the authorities.

This type of bad news can be terminal as high-net-worth clients will naturally shy away from anyone likely to be attracting the specific interest of the tax authorities. The fact that withdrawals for the first quarter were greater than deposits is not exactly encouraging when you realise that this state of affairs happened before the aforementioned tax investigations. What will be their deposit/withdrawal rate over the next few months?

Commodity-wise, Gold and precious metals will attempt to hang on to the current levels. As I have commented many times over the past couple of months, gold is not the 'new paradigm' - it is just another investment tool. If it gets too cheap it will rally and if it gets too expensive it will fall.

All the talk of $1500 and $2000 may well be correct in the long term but at the moment the trend is getting bearish. Each fall is hitting new lows and each rally failing to attain the previous rally's highs. This is classic bear market material and there is a good chance of a move back up to the $902 resistance level. However, if the major 845 to 850 support is attacked then unfortunately for all those gold bulls, the probability then swings towards a return to the high 600's which dominated the price action of early 2007.