August 10th, 2011
07:04 PM GMT
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Editors note:  David Buik is a veteran commentator and partner of BGC partners. This is his take on the markets of August 9, 2011.

I have been associated with markets for 49 years and I have never, ever known such volatility such as the Dow experienced [on] 9th August 2011, from the opening at 1.30pm BST up until 5.30pm BST, and there were still 4 hours to go.

The Dow had moved 2000 points from the opening – down 3%, then up 6%, then down 4%, then up 3%, then down 2% and at 5.30pm it was up 2% at 11033 (20% movement).

Quite astonishing! I was there for October 1987, where of course it moved more violently in one direction (down 20%) and also in October 2008, when it fell 9%.

Talk about traders running around like ‘headless chickens’, trying to interpret what the Fed will do, what the U.S. government would like to do in terms of employment tax cuts, and looking at the tea leaves attempting to interpret whether there will be a ‘double-dip’ recession returning to the agenda.

Then there have been hedge fund forced sales, programme trades and auctions to deal with. Talk about a maze of fearful intrigue!

Volatility on the FTSE 100 has also represented a roller-coaster rise to remember and it may not be all over.

[On August 9] the FTSE opened down 110 points, fell further to hit a low of 4791 (down 277 points) and rallied on the back of New York to end the session up 96 points at 5164 – a swing of 373 points. Volumes were very strong – 2 billion shares were traded on the LSE with probably 1 billion of auction and programme trades to come.

Vodafone saw 500 million shares traded, with BT coming in with 115 million and HSBC with 117 million. FTSE 100 utility companies saw volumes up from yesterday’s rather paltry number of 8 million to 51 million traded today.

Some believe that the ECB’s measures will work – hope so, but I doubt it. Some think the market is well over-sold –on valuations they are right and most people are going with the flow, as logic has no role to play when up against dire sentiment – pure momentum trading is the name of the gamer, hoping that political leadership, which has been AWOL in Europe for many months, may sometime make its presence felt.

At least British PM Cameron and Chancellor Osborne have laid out their stall. I cannot believe for one minute that the civil unrest has any association with the UK’s the austerity programme. Unless this vandalism and thuggery is cleared up quickly, retail activity will look very weak and will thus damage a return to real growth. Keep your tin hat within reach, I suggest.

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