AFTER the extreme volatility experienced last week in the equity, forex and commodity markets, following on from the disastrous earthquake, tsunami and ensuing nuclear crisis in Japan, we look set to take another hit on the open this morning, on the first day of trading after military action was launched against Libya after a ceasefire was broken by Gaddafi.

In out-of-hours trading, GFT is forecasting the UK’s FTSE 100 index to open down 12 points from Friday’s close at 5,706. The German DAX is quoted to open down 15 points at 6,649 and the French CAC is called down 10 points at 3,800.

The European bourses had their biggest weekly drop since July in the aftermath of the tragedy in Japan.

Despite a joint intervention by the G7 in the foreign exchange market for the first time since 2000 in a successful attempt to halt Japan’s soaring currency, investors are unlikely to rush back into equities just yet. The uncertainties surrounding unrest in the Middle East and North Africa are still very much a factor, not least the anxiety that the UK could be entering a prolonged drawn-out war following the commencement of an air assault on Libya by the Allies. Investors will be watching developments closely for news of any retaliation.

The UK budget is announced on Wednesday, and although Chancellor Osborne is unlikely to introduce any material changes to existing policy, there is scope for some surprise by way of a rumoured fuel duty stabiliser or even merging income tax and National Insurance.

Elsewhere a plethora of economic data from the US is scheduled for the next few days, with existing and new home sales, durable goods orders, jobless claims and finally GDP on Friday all adding to the volatile mix.

Martin Slaney is director of global dealing operations for GFT.