SPREAD BET GURU
MARKET STRATEGIST
[email protected]
Q. Dear Josh, which are the major companies announcing this week and what is the sentiment likely to be for the new earnings season?
A. This week marks the start of the second quarter US earnings season and already we have started to see equity prices fluctuate in anticipation of results. Last week, State Street, a US bank, announced that its earnings would beat market expectations and this could contribute to a surge in bullish sentiment as many investors become convinced that other US banks could follow suit and report a similar outperformance when they announce over the next few weeks.
The market will pay attention to company earnings and whether the numbers they announce outperform or under-perform the consensus. However, in light of the strong headwinds emanating from the massive austerity measures announced across the major economies, traders are also likely to focus more than usual on the outlook for the rest of the year and for 2011. There is a large degree of continuing uncertainty which means good quarterly earnings announcements won’t necessarily be enough to restore full investor confidence. So don’t be too surprised if stock prices don’t track earnings explicitly. Alcoa kicks us off today while major companies to keep track of later in the week include Intel on Tuesday, Rio Tinto on Wednesday, Google and JP Morgan on Thursday. Bank of America, Citigroup and General Electric are all announcing in Friday’s session, guaranteeing an interesting end to the week.
Q. Dear Josh, what are spread betters at City Index currently doing?
A. We have seen clients buy strongly into both the FTSE 100 and other key European indices with some betters timing their trades on last week’s rally particularly well. The FTSE 100 saw a strong surge from lows under 4,850 on Monday up to a close on Friday at 5,137. The German Dax climbed over 200 points from its position of around 5,850 at the start of the week. We did start to see some profit taking late on Thursday but, despite these exits, the majority of index positions for our clients remain long. That said, most index trades are being taken up on short-term daily contracts with fairly close stop losses. This suggests that while most of our clients remain hopeful of another rally this week, they are maintaining strong risk management control should the markets sell off.
Q. Dear Josh, do you know whether Paul the psychic octopus can predict the FTSE’s movements?
A. I suspect it’s only a matter of time until someone convinces themselves that they have a psychic dog that barks once for a bullish day or twice for a bearish day.