Financial Markets: Bulls Ready To Repeat 09 Rally

Credit market outperformance was reversed today as investors took profits ahead of the FED minutes. The FOMC statement this afternoon will be watched even more closely than usual given the expectations of further quantitative easing.The bulls are ready to repeat “The Grand Rally of 2009”.

“…and chairman Ben Bernanke is well-known for favouring of “unconventional”  measures…”

Gavan Nolan

An expansion of the FED balance sheet was positive for risky assets during 2009 – when the US stock market gained more than 60% – and the rally in recent weeks suggests that investors are expecting a similar outcome in the coming months. But there are dissenting voices within the FOMC;  Thomas Hoenig has been vocal in his opposition. However, he is outnumbered, and chairman Ben Bernanke is well-known for his “love of unconventional  measures”.

Some investors are expecting a provisional asset purchase schedule to be announced dependent on the evolution of economic data. The Markit iTraxx Europe move below 100bp proved short-lived as the profit taking pushed it back above the key level, according to Markit Financial Information.

A tightening in Chinese monetary policy also dampened sentiment earlier in the day. China’s central bank said that it was raising the reserve requirement ratio of four major state-owned lenders and two privately-owned banks in an effort to rein in rampant lending.

The move served as a reminder of the different positions the US and China, not to mention the ongoing imbalances in the global economy.

Intel’s results after the close, mostley getting overshadowed by the FED minutes, will be keenly anticipated nonetheless.

“A relatively weak third-quarter is expected given the chip maker’s sales warning in August. But it will be the fourth-quarter outlook that investors will be watching out for,” Gavan Nolan, vice president at Markit Credit Research writes.

The final quarter of the year is traditionally the strongest for PC makers and the markets will be looking at the outlook as a gauge of demand.

“JP Morgan‘s results tomorrow could also be a catalyst for spread change, and the bank’s spreads were 7bp wider at 84bp at the time of writing,” Nolan notes, adding;  “Fortune Brands and JC Penney continued to widen sharply after activist hedge fund Pershing Square revealed that it has bought large stakes in both firms. Pershing, owned by investor William Ackman, is known for pressurising companies into shareholder-friendly actions.”

  • Markit iTraxx Europe 101bp (+3), Markit iTraxx Crossover 464bp (+8)
  • Markit iTraxx SovX Western Europe 145.5bp (+3.5)
  • Markit iTraxx Senior Financials 122bp (+3)
  • Sovereigns – Greece 690bp (-4), Spain 210bp (+2), Portugal 398bp (+14), Italy 184bp (+5), Ireland 437bp (+15), Belgium 126bp (+4)
  • BP 146bp (+5)

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UNIQUE MARKET ACTIVITY:

The ‘Unique Market Activity’ section lists stocks which were not active on Markit BOAT on the previous trading day.

Markit BOAT is a trade reporting platform which consolidates pan-European cash equity trade data from MTFs, Dark Pools and OTC transactions. The trading activity in this report took place on 11th October 2010 and was published by Markit BOAT on the same day. Trading activity reported with the ‘Market Condition’ flag is excluded from this report. Such trading activity is not relevant because the trade price and/or trading process does not reference or correlate with the then current market price.

Name Sector Volume Turnover €
YOOX Consumer Services 382,200 2,938,218
BROOKFIELD ASSET MANAGEMENT Financials 136,900 2,838,211
PRINCESS PRIVATE EQUITY HOLDING Financials 465,483 2,327,415
HANDLOWY Financials 34,413 761,543
PBG Industrials 11,496 689,591
AMPLIFON Health Care 187,103 657,895
SVM UK ACTIVE FUND Financials 300,000 586,441
PIAGGIO Consumer Goods 257,485 581,691
POWSZECHNY ZAKLAD UBEZPIECZEN Financials 5,716 568,891
GERRY WEBER INTERNATIONAL Consumer Goods 18,039 566,170

Top 10 ETF

Name Volume Turnover €
DJ STOXX 600 OPTIMISED FOOD & BEVERAGE SOURCE ETF 165,158 27,466,410
DJ STOXX 600 OPTIMISED BASIC RESOURCES SOURCE ETF 60,387 19,844,021
DJ STOXX 600 OPTIMISED INSURANCE SOURCE ETF 337,040 14,360,006
DJ STOXX 600 OPTIMISED AUTOMOBILES & PARTS SOURCE ETF 78,705 13,612,090
DJ STOXX 600 OPTIMISED BANKS SOURCE ETF 190,000 13,567,805
ISHARES DAX DE 176,000 10,266,080
ETFS GRAIN DJ-UBSCISM 2,300,140 10,024,089
ISHARES DJ ST 600 TELECOM DE 363,121 9,938,622
DJ STOXX 600 OPTIMISED RETAIL SOURCE ETF 68,351 8,181,744
ISHARES PLC – ISHARES FTSE 100 1,246,762 8,084,082

Top 10 Trades

Name Sector Volume Turnover €
BBVA Financials 17,000,000 165,750,000
BANCO SANTANDER Financials 10,000,000 93,699,999
GLAXOSMITHKLINE Health Care 5,000,000 74,691,679
EBRO PULEVA Consumer Goods 3,031,476 44,380,810
SNAM RETE GAS Oil & Gas 10,000,000 37,499,061
BSKYB Consumer Services 3,170,413 25,661,323
ENI Oil & Gas 1,488,384 24,111,822
TELEFONICA Telecoms 1,250,000 23,691,487
RENAULT Consumer Goods 425,000 16,575,000
BEKAERT Industrials 80,000 16,124,000

Major Movers

Name Sector Volume Volume (T-1) % Change
PV CRYSTALOX SOLAR Industrials 11,398,939 55,654 20382%
ENTERPRISE INNS Consumer Services 9,716,859 482,223 1915%
BSKYB Consumer Services 7,079,030 509,495 1289%
ENI Oil & Gas 6,112,519 1,170,186 422%
UNICREDIT Financials 15,525,750 4,513,964 244%
ENEL Utilities 4,756,320 1,640,725 190%
ALCATEL LUCENT Technology 4,130,134 1,780,534 132%
BT Telecoms 12,542,976 6,625,224 89%
BP Oil & Gas 5,314,114 3,273,075 62%
BAE SYSTEMS Industrials 5,515,663 3,882,406 42%

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