CFD Traders Diary
Cautious start ahead of interest rate announcements
10/4/2008
It is a big session for news today, with something for everyone on bid stories, commodities and of course the lunchtime Bank of England announcement. After the Halifax figures on house prices earlier in the week, it seems that there is increasing pressure for the MPC to lower rates, but they need to weigh this against the weakness of sterling, which has moved to a new low against sterling.
On the M&A front, British Energy is again well ahead on press reports that German power group RWE may have tabled an offer for valuing the company at as much as £11bn. BGY also said today that reduction in output from refueling operations next year was expected to increase as nuclear output for the year was lower but still marginally ahead of current market expectations. Overall, this is an intriguing situation, and if you hold the shares, stay with them.
For once, BHP Billiton is leading the blue chip fallers after the stunning risers of recent days. Following numerous rumours, it said this morning that it was not aware of any proposed acquisition by Chinese authorities to buy a substantial stake in the group, and the fallout has spread to Antofagasta, Kazakhmys, Rio Tinto, Lonmin, Xstrata and Anglo American. In the same sector, Vedanta Resources said aluminium production in Q4 was the highest ever quarterly production, though zinc production in Zambia fell in the period. There may be more merger activity to come in the sector, but we cannot help feeling that many shares are now trading on the expectation of significantly higher long term commodity prices, which is by no means a given in coming months.
