No chance of a Christmas rest as markets stay under pressure

AFTER failing to break above resistance at 5,600 (the 61.8 per cent Fibonacci Retracement of this year’s May-to-August sell-off) last week, the FTSE100 pulled back sharply. Sentiment turned negative following another botched EU summit. While the UK has been labelled the villain for vetoing treaty changes, the fact is that EU policymakers remain unwilling to take the unpalatable measures necessary to deal with the failure of the Eurozone in its current form. Closer European fiscal integration is required for the single currency to work. But the immediate issue is the solvency (or otherwise) of Europe’s banks and elevated yields on sovereign debt. The ECB resolutely refuses to become “lender of last resort” and the pressure is back on individual countries to cut spending and boost growth while having no control over their currencies or interest rates.

GFT quotes two-way prices on stock indices around the clock, even when the underlying markets are closed. The FTSE 100 index is called to open down 27 points at 5360. The German DAX is expected to open down 32 points at 5670 and the French CAC 40 is forecast to open down 22 points at 2950.

We may be in the last trading week before Christmas, but there’s no let-up on the economic data front. The Bank of England’s Quarterly Bulletin was released overnight and investors will be searching for any fresh commentary from the Bank on the European debt crisis and the probability of additional quantitative easing. Tomorrow we’ll have an update on consumer confidence in the UK and Germany, together with the German Ifo Business Climate Index. Later that day, we have Building Permits and Housing Starts from the US.

This is followed on Wednesday by the Bank of Japan rate decision and press conference, the release of the Bank of England’s MPC minutes and US Existing Home Sales. Thursday brings updates on US weekly jobless numbers, consumer sentiment, inflation expectations and the final third quarter GDP reading.

We round off the week with US Durable Goods, Personal Income and Spending, and New Home Sales. Recent US data has generally surprised to the upside boosting the theory that the US is decoupling from the rest of the world. This hypothesis could be severely tested once we get into the New Year.

Martin Slaney is director of Global Dealing Operations at GFT