CFD Traders Diary
US falls spill over into a weak London market
10/7/2008
Yesterday's rally on the FTSE 100 index was short lived as the sharp drops seen in US financial stocks led to a 100 point fall in London this morning. Many of the beaten down stocks that had staged good moves were again hit hard, but the rise in volatility does suggest a potential trend change sooner than later.
In results, shares of Associated British Foods fell around 4% despite posting a 24% rise in Q3 revenues as it said like-for-like sales at its discount fashion chain Primark were held back by weak trading in April due to the deteriorating consumer background. The group also said difficult conditions were having an impact on consumer demand but aside from the sugar division, it still expected profit to rise in H2 in the rest of the group. This is a hard call, but you have to say these could go lower before things improve.
Back in the housebuilders, Barratt Developments announced 1,200 job cuts, and said it expected to take an £85m write-down hit in its full-year results. It said total completions in the year to 30th June 2008 rose 8.3% to 18,588 but fell 13.8% on a like-for-like basis. Although the shares have rallied 8% so far, we still see this as highly dangerous and a potential debt-for-equity swap may be the eventual outcome.
There was better news at Man Group, which said funds under management rose to $79.5bn at 30 June 2008 from $74.6bn at 31 March 2008. The accompanying statement was solid as usual, and the 3% rise looks fair so far. Once the overall market trends turn, Man Group should be in the forefront of the move.
