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Liontrust Dealer's Blog - 31/01/2011

"What we have begun cannot go back" - Mohamed El Baradei former head of the International Atomic Energy Agency, Noble Peace Prize laureate andleading opposition figure addresses the crowd in Tahrir Square Cario (Sunday night)

Egyptian worries continued to weigh on markets post our departure on Friday with the S&P closing down a further 0.6% from 4.30 UK time, coming to rest at 1276. The threat of closure of the Suez Canal seemed to spark investors into life, as they had been largely ignoring the unfolding situation from an investment point of view for most of the week (certainly in developed markets). Oil moved $4 better and Gold bounced off the 144-day moving average Richard pointed out on Friday. It appears the thread of trouble spreading throughout the Middle East, a large oil price spike or just plain old risk aversion are the main areas of concern, rather than a dent in Egyptian GDP causing a global double dip.

Liontrust Dealer's Blog - 28/01/2011

"Peace is much more precious than a piece of land... let there be no more wars".  Anwar Sadat, 3rd President of Egypt, 25th December 1918 – 6th October 1981

Wall Street rallied off the intra-day lows to close up small. Overnight we had comments from Moody's on the US' Aaa rating. Specifically the agency said that "Although no rating action is contemplated at this time, the time frame for possible future actions appears to be shortening, and the probability of assigning a negative outlook in the coming two years is rising". This is certainly not the first time that we've heard from Moody's on this subject and it is a subject that will, I suspect, continue to raise its head. 

Liontrust Dealer's Blog - 27/01/2011

“The surface appearance of the market is apt to be deceptive” – Charles Dow

Overnight the Dow Industrial Index finally breached the psychologically important level of 12,000 for the first time since June 2008. It was unable, however, to hold it closing at 11985.44. “Dow Theory” derived from Wall Street Journal articles written by Charles Dow in the 1880’s only ‘counts’ a price if the market manages to close at the level (i.e. he ignored intra-day highs andlows), but intraday we made it to 12020.44. Technically significant or not,the market was up despite commentator Marc Faber stating he sees a 10% correction round the corner as the market is overbought (adding to the call by Tom Demark last week). Positive sentiments included the State of the Union address by President Obama (job’s are his “number one focus”) and the Fed’s unanimous decision to keep supporting the economy andthe better(ish) housing data. 

Liontrust Dealer's Blog - 26/01/2011

“We are not retreating – we are advancing in a different direction”. General Douglas MacArthur, American general, January 26th 1880 – April 5th 1964

A decent rebound from US equities post our departure yesterday saw the S&P500 close up a fraction. This, coupled with a decent rebound in China overnight and most Far Eastern markets following suit, ensured a positive opening for risk assets in Europe this morning.  

Liontrust Dealer's Blog - 25/01/2011

“There is no such uncertainty as a sure thing”. Robert Burns “The Bard”, 25th January 1759 – 21st July 1796

With lines like the above it is probably reasonable to assume that wee Rabbie would have been a contrarian investor!

I can only imagine what he would have made of the pronouncements from Spain’s finance minister, Elena Salgado, last night. Whilst a step in the right direction (that was expected) the size of the recapitalisation of the cajas is considerably lower than market expectations, with government estimates below EUR20bn. This contrasts sharply with the consensus market view of between EUR50bn-EUR100bn. It is highly probable that the government chose not to go with a larger number in advance of the regional elections in May, as well as to avoid interference from EU/EFSF. Markets are likely to be disappointed by this and, not surprisingly, Spanish bank shares opened lower post the recent strong run. 

Liontrust Dealer's Blog

According to a recent study Monday has been voted “Least Popular Day of the Week” 176 years in a row

The listless trading continued post our departure on Friday evening with the markets finishing at generally lower levels, though the Dow still managed to close at a 2 ½ year high thanks to a firm industrial sector on the back of GE (+7%), overshadowing the somewhat weaker statement from Bank of America (-2%) and a poor performance from AMD (-6%) post reporting flat revenues. Asian markets closed mixed ahead of a busy corporate week, with China once again proving a drag thanks to ongoing concerns about further tightening following last week’s stronger data. Goldman Sachs also had the following to say in a note; “We think China equities will remain range-bound due to frequent policy shifts in the coming months until counter-inflation policy effectiveness can be proven.” One technical man I follow has recently pointed out a four year flag-pattern developing on the Shanghai Composite, which suggest a “very very large” move ahead. We’ll have to wait and see who is proven correct.

Liontrust Dealer's Blog - 21/01/2011

“The smallest deed is better than the grandest intention”. Roger Baldwin, American social activist, January 21st 1884 – August 26th 1981

The minute that London closed yesterday market the intra-day low for the S&P which rallied well in afternoon trading. I think many observers were somewhat surprised that the market failed to react positively to what was some pleasing macro data. Even the Philly Fed which, on first glance, appeared to be a little disappointing, was actually quite robust. The headline fell to 19.3 (vs 20.8 expected) but new orders (23.6 v 10.6), shipments (13.4 v 5.2), and employment (17.6 v 4.3) all rose. Indeed the employment component saw the largest monthly increase in 7 years. 

Liontrust Dealer's Blog

“Experience is what you get while looking for something else” - Federico Fellini, Italian film director, January 20th 1920 – October 31st 1993

The sell off that got under way yesterday afternoon, triggered, in the main, by somewhat disappointing results from Goldman Sachs continued after we packed up and went home last night. My experience of banks/investment banks reporting  has been that there are no finer exponents of delivering results that manage to exceed market expectations. As a result, markets tend to anticipate results that exceed guidance and surpass expectation. Goldman’s numbers yesterday were essentially in line with market expectations (although the mix was a tad disappointing). And yet the shares closed down by more than 4.5%, for the simple reason that the results were below the “whisper” number. The whisper number is what market participants unofficially think a company will make. And in the case of investment banks, it is invariably a fair bit higher than the official broker consensus, as was the case with Goldman Sachs yesterday. 

Liontrust Dealer's Blog - 19/01/2011

“The trend is your friend until it ends” - Tom Demark

The market remained in optimistic mood yesterday with the Dow hitting a 2 ½ year high despite Citigroup falling post their earnings disappointment. Apple recovered from the sad Steve Jobs news as their numbers smashed analyst estimates, reporting a record quarterly profit of $6.43 a share, beating the average analyst $5.40 estimate by some 19%. Not a bad showing from the second largest firm on the planet. Asian markets followed suit with the AsiaPac index also closing at a 2 ½ year high led by the Chinese market which closed up 2% (prior to their GDP data out overnight). Japanese electronic andpart suppliers jumped as the tech sector bellwether IBM also beat analyst numbers thanks to a long-awaited recovery in its services business, raising hopes that global companies are confident in spending more on technology. 

Liontrust Dealer's Blog

“As a bull market continues, almost anything you buy goes up. It makes you feel that investing in stocks is a very easy and safe and that you're a financial genius.” - Ron Chernow

With markets closed the main news stateside yesterday came from Apple who confirmed inspirational leader Steve Jobs would be taking medical leave for the time being. This caused the German line of their stock to fall just shy of 9% & put pressure on the Nasdaq future as Apple is about 8% of the index. Asia markets opened mixed before trading higher, tech shares bouncing on expectations DRAM prices might rise after Tokyo listed Elpida Memory announced plans to raise the price by 10%. Weakness was apparent in the steel sector as a Nikkei News reported companies might miss forecasts due to higher material costs.

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