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This week was all about GDP growth. With on-going fears about whether China (7.7% YoY) is slowing or not, it was the turn of the UK and US to release Q1 preliminary estimates. The UK’s 0.6% YoY beat expectations (consensus flat), helped by a strong services sector. Good news also that a triple-dip recession was avoided helping Chancellor Osborne maintain his dignity for the second time in 3 days (UK borrowing fell in 2012, just). So the UK’s still not really growing. Nor is the Eurozone, shrinking due to austerity to combat the sovereign debt crisis. And so we cross the Atlantic, to where the financial crisis began with a housing bust, and US growth of 2.5% despite recent spending cuts. Consensus may have wanted 3% but it’s still decent given the global economic climate – the kind of long-term growth estimate I was plugging into financial models as a junior equity analyst. While China saw a big reaction to its number, markets haven’t really reacted to this week’s figures, possibly fearful of revisions (2 more estimates to come). The UK could be revised up or down, as could the US, but it would surely still show decent growth. And so we have it – growth literally oceans apart. The US (#1 word economy) growing, helped by Fed (QE). The UK not growing, despite help from BoE (QE). Europe not growing, but also not really being helped by ECB (no QE), and likely hurting the UK. Clearly help is need to foster growth on this side of the pond. Calls for an ECB rate next week are increasing after recent poor data. But would it really make a difference? I’m sceptical. Problems seem too deep-rooted in the battered Eurozone periphery. Whatever I think though, it’s clear markets and risk appetite are currently central-bank sensitive. As they say, ‘don’t fight the Fed’ and ‘the trend is your friend’.
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Accendo Markets is an online trading services provider, offering CFDs, spread betting and forex to retail (private) clients. Accendo Markets was established in 2007 and has since gone on to win various awards including “2012 Winner of Best Execution only CFD provider” at City of London Wealth Management awards. Accendo Markets Ltd. is authorised and regulated by the Financial Services Authority (FSA).
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So as we close on another fast-paced, news-filled, gut-wrenching week, I ask myself, and I quote Oliver Twist, “Please sir, can I have some more?” Personally, I like engrossing weeks as we have just had. Daily opportunities, whether it be equities, indices, forex or commodities, we have had them all.
After a pretty downbeat prior week (Chinese GDP figures missing, miners getting slaughtered), one asks whether this was the final straw and whether a serious correction was in place. Fast-forward to this week and every day, bar today (risk off ahead of the weekend) has been pretty positive. Despite fake tweets about the White House being attacked, which caused a 140pt dive on the Dow before quickly recovering, investors generally were in buoyant mood. Helped by the decent weather perhaps?
I’d like to focus on one of my favourite sectors, the Banks. To me this sector never gets old. There is always great interest, anticipation and rollercoaster emotions when they report. This week didn’t disappoint. Barclays was the first UK banking behemoth to report Q1 results. Much excitement among clients on what the results would deliver; would they beat? Would they disappoint?
Although they did post a profit, Barclays missed analyst expectations on account of restructuring costs, approaching nearly £500m. What would you do on hearing this? Maybe take a short position? But wait, and here is where it gets interesting. On updating my clients with an interest in the banks (one of the many reasons clients enjoy trading with Accendo – breaking updates, alerts on their interests), we did see an initial decline but nothing as bad as we might have been expected.
As more news came out we heard the CEO, Mr Jenkins, say it was on track to make significant yearly savings and re-establish itself as the UK’s ‘Go-to’ bank. This, as well as positive broker comments, led to a reversal in the share price, and Barclays at one point trading up over 5%. Yes it did come back by the end of the day, but key is the intraday 8% hi/lo range. This is where CFDs come into their own. You could have taken advantage of that movement either way. Accendo recently made clients aware of how the banks moved in % terms last time they reported. Barclays had a range of 9.3% last time! If you missed out, though don’t fret.
Lloyds Banking Group (LLOY) and Royal Bank of Scotland (RBS) amongst other big blue chips will all be reporting next week (Shell, BP, Sky, RSA, see our Week in Advance.) Are there similar patterns from the last time they reported? Just to make you aware, Lloyds and RBS had 8% and 7% intraday ranges, respectively.
As always, enjoy your weekend.
For any commentary/analyst opinion on anything CFD/Spread Bet/financial markets-related, please contact research@accendomarkets.com
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