Market Rumours

Mr Soros' investment vehicle Soros Fund Management increased its holding in SPDR Gold Trust to 6.2 million shares, worth $663m (£425m) at the end of 2009.It had held 2.5 million shares at the end of the third quarter of 2009.The gold price hit a record high of $1,226.56 an ounce in December, but has since fallen back to about $1,100.Mr Soros himself has suggested that gold may not be a good investment.At the World Economic Forum in Davos last month, he said: "The ultimate asset bubble is gold." However, he did not say whether he was investing in the precious metal. But he also said that when he sees a bubble, "I rush out and buy".Mark Heyhoe, senior mining analyst at Westhouse Securities, said: "He has previously said that gold is the ultimate hedge against inflation - if you think inflation's going to rise, then I'm not surprised he bought into gold."A lot of people were starting to look at gold, and a lot of people follow what he does," he added. "But you need to buy a lot of gold to shift the price."As well as raising its stake in SPDR, Soros Fund Management also increased its holding in Canadian gold producer Yamana Gold.

Another stark reminder of the U.K. government's enormous need to borrow funds sent sterling lower and weighed on the gilt market too, but left London stocks unmoved Thursday. The public sector borrowed more than expected in January, official figures showed, with tax revenue falling significantly and central government spending also higher. It borrowed a net GBP4.3 billion in January, compared with a net repayment of GBP5.3 billion a year earlier. This was also the first time since records began in 1993 that there was a net borrowing requirement in January. Economists surveyed by Dow Jones Newswires had expected a repayment by the public sector of GBP2.8 billion last month. However, the Office for National Statistics said net borrowing was revised down in December to GBP14.0 billion from GBP15.7 billion originally. The data showed central government 'current spending' rose 9.7% on the year, with debt interest payments up more than 50% from a year earlier and increased spending by departments of 8.5%. Sterling hit its low for the day so far against the dollar in the wake of the numbers, which reminded the market of the U.K.'s fiscal overstretch. The pound bought $1.5574 as the data were digested, but has since clawed back a little ground. It was at $1.5585 at 1010 GMT. The euro bought GBP0.8716, the day's high so far. Gilts, meanwhile, edged lower. The March futures contract was down 0.23 on the day at 114.51, from 114.58 before the data, and the 10-year benchmark gilt was down 0.26 on the day in the cash market at 103.329, yielding 4.056%. However, London share prices shrugged off the figures, with the FTSE 100 index up 0.6% at 5307.7. "The U.K.'s public finances figures are truly dreadful and further underline the need for much more decisive action to improve the fiscal position when the economy is strong enough to withstand it," said analysts at London's Capital Economics.

Implied volatility on 1-month ATM EUR/USD options higher at 11.45%/11.85% vs 10.75%/11.20% overnight on demand for hedges vs sharp fluctuations, says Japan options dealer. 1-month ATM straddles with EUR30 million bought at 11.6% earlier in Asia time, while there're indications that some purchased same type of options at 11.65%, he says. Deals indicate that investors taking out on protection vs EUR's downside risks, which still persist due partly to renewed worry over Italy's finances.

Euro/dollar currency options rose in Asia on Thursday as the underlying exchange rate hit a one-week low amid persistent worries about Europe's debt problems, fueling demand for hedges against further euro declines. The common European currency fell to $1.3557, the lowest since $1.3532 on Feb. 12, in early Asian trading. That prompted investors to buy euro/dollar straddle options, a spread position often used to guard against downside risk. It also helped lift implied volatility on one-month at-the-money euro/dollar contracts to 11.45%/11.85% from 10.75%/11.20% in New York overnight, dealers said.

The European unit's decline comes after concerns over Italy's finances emerged overnight, further unnerving investors already worried about debt problems in Greece, Spain and Portugal. Traders said sentiment toward the euro is worsening, with many shrugging off its brief but sharp gains Tuesday as a blip in a longer-term bear market. "Since early this week, some people have started seeking euro options of around two-month terms and with strikes of $1.33," which would protect them from drops below that level, a Japanese options trader said. "They're taking out on new positions," he added, making him "feel" more buying of such euro options could follow. Meanwhile, implied volatility on one-month ATM dollar/yen options gained after the U.S. currency surged more than Y1 the day before. Some traders bought back short-term straddles they had sold on the bet that the yen and other Asian currencies might move little during China's Lunar New Year holidays, letting the options expire without being exercised, and allowing them to pocket the premiums, dealers said.