Hi everyone,

Happy New Year! I hope you all had a nice Christmas and wish you all the best in your trading for 2010. As we start into a new trading year I thought I’d start 2010 with a post taking a look back at they year that was and look at what for me were some of the highlights (and a few lowlights) of the 12 months just past.

It was certainly a year jam-packed with news - one where equity markets hit lows not seen since 1998, gold hit record highs, the worlds governments bailed out their banks and the US’s largest car manufacturers flirted with bankruptcy for most of the year, to name but a few of the news stories that traders had to deal with in 2009. Below is a month by month review which looks at some of the key news stories that hit the headlines each month. As this post would be rather long to cover the full year altogether I have decided to split the post up into 3 sections, first up January to April. Later in the week I’ll post May to August before finishing up with September to December. As always if you want to add some highlights of your own feel free to use the Comments box below.

January – Obama Takes Office in US, Anglo Nationalised

Believe it or not the markets actually got off to a positive start in January (well only for about a week!) as investors looked forward to a new era of growth for the US under their new Commander In Chief, Barack Obama, who was sworn in on January 20th. Obama had set out many goals as part of his election campaign including health reform and closing Guantanamo Bay but top of his list for his first few months in office was getting the US economy back on it’s feet and much needed job creation. As the year progressed Obama quickly found out the pressures that come with leading the world’s most powerful nation.

Closer to home, 2009 was starting off even worse than 2008 ended, with January seeing the Irish Government finally giving into the inevitable and announcing the long overdue nationalisation of Anglo Irish Bank. Needless to say the news led to a massive sell-off in the other Irish publicly quoted banks with AIB falling a massive 85% in the following days to a low of 25 cent, BoI falling over 70% and Irish Life & Permanent falling 55%. Those brave enough to buy in at these low levels were well rewarded for their risk with with AIB and BoI up over 10 times their January lows by October and IL&P up 5 times it’s January lows. Of course there were many big pull-backs along the way to those October highs, making the Irish banks some of the hardest stocks to trade in 2009. I expect more of the same volatility in 2010 as the market tries to figure out what impact NAMA is going to have on the Irish banking sector.

February – Consumer Confidence Hits All Time Low, The Month of the Stimulus

Driven by a deteriorating business market and rapidly increasing unemployment, the US Consumer Confidence Index sank to an all time low of 25.3 in February, the lowest level since the measure was first taken in 1967. The news confirmed the market’s worst fears on the impact the recession was having on the US and other major economies.

As global markets continued to plummet the US decided to spend their way to stability with February seeing Obama signing a $787 billion stimulus package into law. While it didn’t bring an immediate end to the falling stock markets as the months passed and the benefits of billions in tax cuts and capital spending started to flow into the economy it ultimately led to a recovery in equity markets as the year progressed. It was also one of the main contributors to a weakening US Dollar which went from $1.25 against the Euro at the time the stimulus package was announced to over $1.50 by early December before recovering somewhat in the last couple of weeks.

March – Markets Go Into Freefall, Madoff Sentenced, CRH Raises Cash

The major US and global stock markets hit their low on March 6th, the DOW eventually 6,440. This signalled the button of a steady decline (and at times not so steady but more complete freefall!)  in equity markets which began in October 2007. From it’s highs of over 14,000 the DOW fell 54% before beginning it’s rebound in March of last year. Since then the DOW, S&P 500 and Nasdaq have all risen over 60% in a steady recovery fuelled by record low interest rates in the US and a weak dollar. Click on the chart below to have a closer look at how the DOW preformed in 2009.

DOW 2009 Chart (Click to Enlarge)

March was also the month when Bernard Madoff pleaded guilty to 11 counts of fraud and admitted his investment fund was actually one massive Ponzi scheme. Exact losses suffered by Madoff’s clients are hard to quantify but are believed to be in the region of $18 billion. He was subsequently sentenced to 150 years in prison in June of last year.

At home Ireland’s largest publicly quoted company, CRH, successfully completed the largest rights issue in the history of the State, raising €1.24 billion through the sale of new shares. Given that the rights issue was launched in the middle of the credit crunch the fact that it was over 94% subscribed was a massive vote of confidence for the company. The money raised is expected to be used to pay off €500 million in debt and fund future acquisitions. The run-up to the rights issue saw a big fall-off in CRH’s share price, dropping to below €13 per share at one point in March before rebounding strongly throughout the rest of the year to close 2009 above €19.50 (a 50% increase from its year low).

Also at home, after a High Court appeal Kerry Group eventually completed the €140 million acquisition of Breeo Foods, owner of the Dairygold, Shaws meats, Mitchelstown cheese and Galtee rashers and sausages brands.

April – Japan Announces Stimulus Package, Another Budget for Ireland, Tysabri News Sends Elan Higher

Hot on the heels of the US, the world’s second largest economy announced it’s own stimulus package to help improve it’s faltering economy. Japan’s stimulus package totalled 10 Trillion Yen (or almost $100 billion).

At home Brian Lenihan announced details of Ireland’s 3rd budget in 18 months, one of the most severe in the history of the State aimed at restoring the public finances.  Some of the main measures introduced were:

• The income levy rates doubled to 2%. 4% and 6% and the entry points for each rate reduced
• The health levy rates were also doubled to 4% and 5%
• Mortgage Interest Relief only available for first 7 yrs of the mortgage
• Capital Gains Tax increased from 22% to 25%
• Increases in excise duty on cigarettes and diesel (petrol and drink off the hook)

Also in April an announcement from Elan and partner Biogen Idec outlining new research data showing the potential for their Tysabri drug to reverse damage caused by multiple sclerosis sent shares of the Irish pharmaceutical company higher. This news combined with ever increasing rumours of expected partnership with a major pharmaceutical company sent shares rocketing up 50% over the following 5 weeks.

Ok, that wraps up Part 1 of our 2009 review, until Part 2,
Happy Trading,
SpreadTrader.ie : -)