Weekly Trading Report 23 August 2010 - Last Week's Trading Highlights
A mixed week of economic data and company reports and a rush of takeover activity led to a fluctuating few days for financial markets.
After disappointing news on Monday that the Japanese economy grew by a weaker-than-expected 0.1% in the quarter to June, markets perked up on Tuesday after the Federal Reserve said US industrial production grew by 1.1% month-on-month in July, the fastest rate in almost twelve months.
The upward trajectory didn’t last long: an unexpected rise in US jobless claims, combined with a contraction in the Philadelphia manufacturing activity index, led to the Dow tumbling 144 points (-1.4%) to 10271.21 on Thursday, while the FTSE 100 plunged 92 points (-1.7%) to 5211.29.
Data on Tuesday showed that the UK’s inflation rate slowed marginally, from 3.2% to 3.1%, in July, but remains comfortably above the Bank of England’s 2% target rate.
In his open letter to the chancellor, Mervyn King said next January’s VAT rise to 20% meant inflation was not likely to fall below target until 2012.
It was the UK’s high inflation rate which caused the one dissenting vote during the MPC’s latest interest-rate meeting. Midweek minutes revealed Andrew Sentance wanted to increase rates to 0.75%, but was outvoted 8-1. On Monday, Eurozone inflation reached a 20-month high of 1.7%, up from 1.4% in June.
Thursday’s July public sector net borrowing figure, at £3.8 billion, was labelled ‘encouraging’ by analysts. There was further welcome positive news on Thursday with the latest UK retail sales data, which showed a 1.1% jump compared with June.
The week’s spate of takeover activity was kick-started on Monday after insurance company Aviva confirmed it had rejected an approach from rival RSA.
On Wednesday BHP Billiton’s bid for the world’s biggest fertiliser firm, Potash, turned hostile after the mining giant’s initial $40 billion offer was rejected.
Then, on Friday, shares in BG Group surged 6% after rumours of an imminent bid, while in the US chip-maker Intel agreed a $7.68 billion deal to buy computer security firm McAfee.
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Weekly Trading Report 23 August 2010 - The Week Ahead
Indicators
The Chicago Fed activity index kicks off the week stateside, with new home sales due out midweek. Meanwhile, back in the UK, BBA mortgage lending data is released on Tuesday.
UK second-quarter GDP figures could shape trading on Friday morning, while the University of Michigan consumer sentiment survey is due out mid-afternoon.
Company Results and Reports
It’s set to be a busy week for the FTSE’s mining companies, with half-year figures from Antofagasta and Kazakhmys on Tuesday and Thursday respectively.
Meanwhile BHP Billiton announces annual results on Wednesday. These are bound to attract extra attention after BHP’s recent hostile takeover bid for Potash Corp.
Also keep an eye out for quarterlies from multinational software company Novell, and jeweller Tiffany & Co.
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For previous weeks see below.
Note - Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.
'Financial Spread Betting 23 August 2010', Review by D. Jones, last update: 23-Aug-10
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