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Bearish US sentiment likely to buffet Europe too

European stock markets are headed for a major tumble this morning, as a sell-off on US markets gathered steam on Friday evening.

GFT is forecasting the UK’s FTSE 100 to open down a hefty 90 points from Friday’s close, around 5,212. The German DAX is expected to open down 105 points at 5,590 and the French CAC 40 is quoted around 3,750, down 50 points on the day.

The bearish turn-around in sentiment, which has taken America’s Dow Jones index to its lowest level in nearly a year, seems to have been prompted primarily by concerns over President Obama’s plans to impose limits on banks’ speculative operations, but investors are also edgy about tech stock earnings, and rumours that Ben Bernanke might not get re-nominated for the position of Federal Reserve Chairman also add to the anxiety.

This mounting uncertainty is likely to continue to be the over-riding emotion in the markets this week. The slew of economic reports from the US will add to the volatile mix, with fourth-quarter GDP on Friday the highlights for traders. The Fed’s interest rate decision is scheduled for Wednesday; no change is the widely-held view but as always it’s the statement which accompanies the decision which will be scoured for clues as to the perceived timing of any futures hikes.

Earnings-wise watch out for Apple and Google today, plus Microsoft and Amazon on Thursday. On this side of the pond, tomorrow is the key day when the release of the GDP data is expected to show the UK has finally officially exited recession after six consecutive quarters in decline.

Martin Slaney is director of global dealing operations at GFT.