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UK stock market commentary (October 19, 2012): Beware trading stocks like Google

Rather than a fat finger error it was an early release of Google’s quarterly results which were supposed to be announced after the bell that were mistakenly revealed to the market before the close causing the stock price to plunge over 11% and settling lower in the end by over 8%. The 11% decline came in the space of under 10 minutes. In terms of dollars this was around 82 bucks, or a total of 8200 points, so anyone with as little as £1 per point in the stock if they’d bought earlier in the day would have been nursing a £8200 loss. That is what sort of risk you are open to if you are trading some of these high value US stocks priced at 600, 700 or 800 dollars a share. Apple was also affected by the broader tech sell off yesterday declining almost 2%, and that in itself is a move of 1200 points.

It’s little wonder that the stocks was closed for trading for two hours after the announcement which took so many people by complete surprise and if there’s anything that stock markets don’t like, it’s surprises. The decline in advertising is a major concern for the internet beast as they suffer from slower global growth in their own way, but like so many other firms at the moment, companies simply aren’t spending as much on their online advertising as they were a year ago which has knocked the company’s average cost-per-click for six. We may all still be using the website to search for things on the internet, find directions to our destinations and checking reviews of a certain shop or restaurant, but the revenue generating side of the business is falling whilst its costs are remaining the same. Google suffered a similar fall at the beginning of the year and so it has straddled 2012 with two 8% declines after missing Wall Street forecasts quite significantly, so the warning to clients is if you are going to trade these sorts of stocks, you had better have deep pockets.

Meanwhile during the US session stocks held up quite well following a positive reading for Philadelphia manufacturing which acted as good support for the Dow Jones with the index ending rather flat at 13,542. This morning European indices are mixed and largely flat hovering around their recent highs. At the time of writing the FTSE is at 5912 still holding onto the 5900 level so for now near term support and resistance haven’t changed with eyes on the 5885/35/5770 and 5930/50 levels.

At a summit in Brussels, the EU leaders tried to reach an agreement for a single supervisory body able to break the links between banks and governments and indeed this early morning it has been announced they reached a consensus, but so far the reaction in the currency markets has been muted. Yesterday, the euro lost 52 pips to 1.3066 after breaking one month high and this morning that is exactly where the cross remains.

Following a three day rally, gold is set for a second weekly decline as improvement in economic data in the US and China has taken the shine of the metal as a hedge against inflation. It closed at $1741.2 yesterday, around 1 percent lower this week as short-term pressure in light of improving global economic data. It hit a lifetime high of around $1921 last year and lately a stronger dollar has dragged it down and prevented it passing the $1800 mark. Investors await the outcome of the eurozone summit.

A higher than anticipated rise in the jobless claims figure pushed crude prices down yesterday. Nonetheless, reports that TransCanada Corp shut a key pipeline going to Cushing, Oklahoma, the delivery point for the WTI pushed for a rebound. So the WTI crude prices ended unchanged at $92.40 amid the same consolidation pattern seen for nearly two weeks.