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Big falls around the world spill over into London

We saw almost a perfect storm of bad news yesterday for investors which caused big falls around the world’s markets. This has continued today, with the FTSE 100 index down 30 points mid-morning as banks continue to be sold off, oil prices having hit new highs at $142 a barrel and more downbeat economic news both in the US and over here.

Oil stocks naturally dominate the risers with Cairn Energy up 5%, with Tullow and BG Group also strong. Miners have also resisted the falls elsewhere after a big rise in metals overnight.

After its sharp reversal yesterday, London Stock Exchange is down another 5% with traders said to be deeply unimpressed by its "deep pool" exchange tie-up with Lehman Bros. There were also reports that rival deep pool project Turquoise was set to launch in mid-July, and with these concerns the shares could certainly fall much further from here.

In the supermarket sector, there are signs of more distress, as Tesco is about to start a more severe price war according to press reports. It will reduce the price of 3,000 items by up to 50% from Monday. Rival Asda has hit back by promising to sell ten staple items, including bread, eggs and butter, for only 50p from today. We wonder how all this is likely to affect margins and retain our short position in Tesco, which is going very well so far.



Head of Research at Blue Index, specialists in trading Contracts For Difference
27/06/2008

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