Betfair Official Blog

The Wolves are circulating Bears! Nothing to do with County Cricket, its the credit crisis biting again

Daily View - 11th March

As markets get tougher, so the wolves begin to strike, and yesterday Bear Stearns and Lehman were forced into swift denunciations after rumours circulated about possible Chapter 11 situations. Whilst the security of the companies is not in doubt, the mere mention of weakness will have a negative effect. Twitchy depositors fearful of losing substantial sums, will be edging towards the exit, and Bear Stearns stock (already hard hit over the past year) touched new lows at almost $60 (some 65% off the highs of last January at $172.50).

Today sees the FTSE opening a bit stronger after yesterday's sell off, but as usual of late, this appears to be a recurring event where buyers drift into play in the sunshine of a bright new day, only for sellers to regain the upper hand by the close. Prices this morning are at 5659-5660 (up about 30 points.) Both the Nikkei and the Dow have recovered some composure overnight and this will bolster the early activity.

All the major indices are now at lows since the dramatic drop and subsequent recovery on January 21/22, when the Fed made its emergency 1% rate cut. The States have now cut rates to 3% (and are expected to go another 75 pips this month), whilst President Bush has announced a huge fiscal stimulus package, but none of this seems to be bolstering sentiment.

With markets being so volatile, the costs for getting anything wrong are now becoming quite dramatic, particularly in the commodities. Oddly enough, in all the fun over the past few days Gold has actually done very little indeed. In the past few years any price consolidation has generally been a precursor to yet another sharp move higher so bears will be watching the boards very closely. The current price at 973.0-973.5 is up about a dollar but is well within recent days' trading ranges.