German short selling of bonds ban worries market - send dollar to four year high against euro

The FTSE 100 is currently down 128 points to 5,177 after a fall of 115 points to 10,511 last night on the DOW industrials as traders reacted negatively to the news that German authorities are banning naked shorting of certain financial instruments in the debt market.

The euro fell sharply to hit a four year low against the U.S. dollar of 1.21 versus a 52 week high of 1.51. The rise in the dollar sent commodity stocks sharply lower this morning with BHP down 5% to £18.35 and financials are also under pressure with the likes of Barclays down over 6% to £2.86. BP continued its slide down to hit £5.26, a fall of 1.5%. After announcing its rights issue on Monday to acquire the assets of AIG's Asian unit AIA, Prudential shares are down over 4% this morning to £5.09 as analysts still remain unconvinced about the deal.

The heavy fall in Ithaca Energy (IAE) to £1.53 on no news (down 15p, 9% today) has made it a buying opportunity and this has been added to the portfolio this morning. The volatility is Ithaca is amplified by its dual listing on the Toronto Stock Exchange (TSX) and the London Stock Exchange (LSE) which means that currency and trading in Canada have an impact on the U.K.price. WTI crude oil went below $70 yesterday (the lowest point this year). 

Eurozone bail out moves FTSE 100 up over 4%

The FTSE 100 is currently up 223 points or 4% to 5,345 and Dow industrials futures are up 335 points to 10, 719 as investors breathed a sigh of relief on news of the eurozone financial stability package. This is despite all the political uncertainty in the U.K. relating to the Hung parliament. 

The IMF and EU agreed to put together a €720bn (£625 billion) stability fund and the ECB (European Central Bank) announced it planned to buy government and other bonds on the open market. The ECB move was a complete reversal of policy from that stated from its President Jean-Claude Trichet last week.The bank will also reintroduce unlimited offers of three- and six-month liquidity to ease the current liquidity situation.

The eurozone will provide loan guarantees up to €440bn and a further €60bn will support weaker member states such as Portugal and Spain. The IMF will provide up to a further €220bn.

Commodity stocks are moving up significantly this morning. Portfolio holding Coal of Africa (CZA) is up 9% to 133p whilst BHP Billiton (BHP) is 5.8% to £19.73 and Kazakhmys is 9.2% at £13.09. Financials also strengthened with Barclays (BARC) up 34p or 12% to 318p and Royal Bank of Scotland (RBS) up 8% to 49.4p. BP (BP.) is one of the few stocks down, currently down 7p at £5.46 as concerns about the Gulf of Mexico spill still weigh.

Rockhopper Exploration (RKH) shot ahead a further 54p at one stage on further news about its oil find in the Falklands Islands and the share price is now trading at 28% or 41p at 187p. This means RKH is up over 500% since a low of 36p last Wednesday. I'm just a tad disappointed selling out at 125p! For those brave enough to have turned off their trading screens since last week they will have been mightily rewarded - high risk, very high return.

After waiting several weeks for a correction, my decision to start buying last week has been confirmed as correct. With this huge move up today, I wish I had been more aggressive with my buying of stocks especially in the commodity space.

Markets suffer on further European debt fears and commodity sell off

Today the euro fell to a 12-month low against the dollar on skepticism over the Greek government's ability to carry out harsh austerity measures required by the EU/IMF aid package. The DOW Jones Industrials are currently down 155 points to 10,996, the Nasdaq composite is down 55 points at 2,441 and the FTSE 100 is down 100 points at 5,441. Although the German government negotiated to provide the majority of the European Union contribution to Greece, there are fears that Angela Merkel may not get a crucial vote passed to allow the aid to be used.

In the UK, miners and BP dragged down the FTSE 100 index. BP (BP.) is currently down 4% to £5.52 on fears that the clean up bill and compensation payments may amount to as much as $10 billion, only some of which will be covered by liability insurance policies. BHP Billiton, Xstrata and Rio Tinto were all down on news of the Australian resources super tax. BHP (BHP) is currently down 7% to £18.86, Xstrata (XTA)is down 6% to £10.21 and Rio (RIO) is down 4.8% to £32.14.


The correction has given an opportunity to start a little buying after several weeks of sells. The FTSE 100 has been bought at 5,431 and DOW at 10,988. Coal of Africa (CZA) position initiated at 130p. Ithaca Energy (IAE) position increased at 176p.

Australian miners fall on new plan for mining tax

The Australian government says it will impose a Resource Super Profits Tax — also known as the Henry Tax, after the Treasury Secretary Ken Henry — starting from July 2012 on earnings after exploration, capital and dividend payments. Officials said the tax would help the Australian economy and make the system "fairer and simpler" for Australia's working families and businesses. The tax on all mining projects there from July 2012 to raise A$12 billion in the first couple of years. The revenues will be used to trim 2 per cent from the company tax rate and increase pension contributions.The minister for Resources and Energy, Martin Ferguson, said that a "significant proportion of funds" raised from the tax "will be returned to the resources industry through a new resource exploration rebate and investments in the infrastructure," and that the mining sector will also benefit from a lower company tax rate.

Prime Minister, Kevin Rudd, said “Resource profits were more than A$80 billion higher over the past decade, but the Australian people received only an additional A$9 billion. BHP is 40 per cent foreign-owned, Rio Tinto is more than 70 per cent foreign-owned. That means these massively increased profits ... built on Australian resources are mostly going overseas. It’s time for the Australian people ... to get a fairer share of the natural wealth of this country, which ultimately is owned by all Australians.”

The news sent mining stocks operating in Australia such as BHP Billiton down around 2% on the U.S. and Australian market's after falling more heavily earlier in the day. BHP Billiton's Chief Executive Martin Kloppers said in a statement that the tax would result in an increase in the total effective tax rate on the company's profit earned from its Australian operations, from about 43% currently to around 57% from 2013. Xstrata PLC's Chief Executive ,Mick Davis, said that the the proposed tax reduces "the very cash flows that are reinvested in maintaining or expanding existing Australian mines and in developing new operations, protecting existing jobs and creating new ones."