Market update – Heartbreak Hotel

I used the terminology ‘Bad Day at Black Rock!’ a few weeks ago – so repetition is not a good idea! – So let’s give Elvis a run on the rails today – ‘Heartbreak Hotel’ well that’s what it feels like. Just for the benefit of all market anoraks – this year the FTSE 100 is down 7%, FTSE 250 -8.5%%, AIM -19.2%. This ventures to suggest that markets are not liquid! Mind you in a bull market AIM and FTSE 250 would outperform the FTSE 100. Today is the first day for some time that you can visibly see sentiment turning sower. 10-year gilt yields have fallen from 2.13% to 2% and US Treasuries from 2.20% to 1.99% – unprecedented in 24 hours. Rates are clearly not going up in either country in the foreseeable future. The situation in the EU looks absolutely dire with Greece’s 10-year bond yield up from 6.85% to 7.45%. Many market observers think that France and Italy have also lost the plot. Mario Draghi could come galloping over the hill like a knight in shining armour, but will Frau Merkel let him do his job? It would appear not! China’s economy looks flabby with CPI falling again to 1.6%.

There is little to crow about. Sentiment has turned ugly. Insurers were the best performers down just 1.5%. Miners have had a good hiding down over 2%. Banks have been larruped – Barclays -4%, RBS -3%, Oils have had a torrid time with the oil price falling – Nymex at $82.20 – Royal Dutch Shell down 1.6%. Drug stocks have received some tap thanks to Shire’s parlous state of uncertainty – Shire is only down 23% at 3945p, having been down 30% – a loss of £7.5 billion in value. Even Tesco have received wheels of pain across their back – -2%, Next -1.6% and M&S -0.75%. It is a sea of ‘red’ out there – only Royal Mail in positive territory – +3%. At 3.40pm the FTSE was down 133 at 6267. The DOW in New York was light by 180 points. Conditions are exceptionally volatile with 718 million shares changing hands on the LSE with an hour to go – way above recent averages. Are we in a bear market? It still feels relatively like a controlled sell-off. However we could use some good news!

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