CFD Traders Diary
Banks weak again as funding worries persist
23/4/2008
As investors start to realise that there may be more requests by banks from the funding trough, the sector looks very weak and today we have sharp falls in Alliance & Leicester and HBOS following yesterday's record breaking rights issue from RBS. The press has been full of reports quoting different levels of shortfalls in the sector, but the bottom liner is that supply of bank stock looks set to increase and that means lower prices.
At the other end there is no stopping the mining sector with Lonmin up 3% despite cutting its estimate of full year production from 860,000oz to 775,000oz due to ongoing power supply problems in South Africa, although Q2 sales rose by 8.3%. There has also been some more sniping by BHP Billiton against Rio Tinto as the former saw record production levels of copper, manganese ore and alloy as well as a sharp increase in petroleum production in the first nine months of its financial year. It continues to look rosy in the sector although we are slightly more cautious on those stocks with exposure to the gold price, which looks weaker than many base metals at present.
There was also a rise in GlaxoSmithKline which said it would boost it presence in sirtuins, a recently-discovered class of enzymes, with the acquisition of Sirtris Pharmaceuticals for $720m. The market clearly like this move, but on the bigger picture GSK still has plenty to do to get back into a price uptrend, and we remain neutral to slightly bearish here.
