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UK stock market commentary (October 31, 2012): October not a month to remember for investment bankers

The last few years have been torrid for the City but even more so for investment bankers. Excessive risk taking, disproportionate remuneration and rogue traders have made the investment banker one of the most hated professions that exists today. People would almost rather have a traffic warden round for dinner than an investment banker but at the rate things are going there may soon not be many bankers left. Good riddance many people might say and in the cases of excessive risk taking the changes that investment banking is going through are welcome but the changing face of the industry is causing many more job losses. UBS has just recently announced a further 10,000 jobs are to go in their global investment banking division, Deutsche Bank swung the axe in the summer and Barclays, which had spent the last few years under Bob Diamond building a force to be reckoned with in terms of investment banking, is shifting its focus away from the “casino”. UBS is a particularly interesting case though as only around the corner from us here in the City they are having a state of the art new office being built to house all their London operations, but it is to include four football pitch sized trading floors. When they come to fill this new office in a few years time it will be interesting to see if these football pitches will have any players at all.

This morning the good rebound in stocks across Europe looks to be continuing earlier on in the session with the FTSE adding to yesterday’s gains trading up some 10 points at 5860 having reversed our earlier calls for a negative start. With the US markets set to resume normal trading we should at least see an increase in volumes and you can imagine US traders chomping at the bit to get back into action having been kept away from their desk due to hurricane Sandy. At the time of writing we are calling the Dow top open up some 70 points from its Friday close and so it will be interesting to see whether those gains are sustained as investors across the pond fight their way back into their offices.

October has been a funny month for the markets as it commenced with good strength, then weakness, then strength and a tentative test of the year’s highs, weakness and we end up with a burst of strength again. Volatility may have picked up a little which is no surprise for the month of October but overall we are roughly flat to up in the FTSE and slightly lower for the Dow. With November around the corner we are entering the most bullish two months of the year historically so it will be interesting to see if history repeats itself this time round.

Despite a higher than estimated rise in the German unemployment figures, the euro posted a rebound of 58 pips to 1.2960. Investors decided to go bargain hunting as France and Germany reiterated their commitment to find a solution for debt struggling Greece. However, a renegotiation for the existing loans does not seem to be on the table for now. Despite this the single currency has now broken the back of the upper downward trend line and is testing the 1.3000 level at the time of writing. Next targets for the bulls are 1.3020/50/80.

Gold is edging up this morning after closing at $1708.4 yesterday when it looked likely it would break a four-month winning streak. A weaker dollar is expected to support gold prices trading within a tight band as investors wait for key US employment data and next week's presidential election. Political instability in China plus the routine policy meetings of various central banks could also affect the market. Prices are down by around 3.4 percent this month after climbing around 4.7 percent in September as central all over the world pledged to do more to stimulate their flagging economies.

The WTI crude prices rose 41 cents to $85.63 yesterday on expectations of oil demand recovery following super storm Sandy which hit the US East Coast. The big majority of oil refineries are seen to resume their activity soon after the impact was less than anticipated. The US Department of Energy will postpone the release of its weekly crude inventories for tomorrow.