Mike McCudden, Head of Retail Derivatives at Interactive Investor (www.iii.co.uk), gives his thoughts on the trading week so far:
"We have seen very low volumes across equities this week as savvy investors see buying Christmas presents as a safer play than investing in this market. Saying that, poor retail sales figures, increasing unemployment and fears of credit crunch mark two are probably forcing cash under the mattress.
"Over in the Eurozone cracks are appearing in the Franco/German relationship as Merkel plays to her local audience and not to the Eurozone. Furthermore, Germany and France are preparing themselves for a rating cut amidst more poorly received bond auctions and some pretty frightening rumours coming out of Spain. A rating cut in Germany and France will sound the death knell for the EFSF. You just have to look at the performance of the Euro this week to see that confidence is evaporating fast.
"The financial markets wanted swift action and for a moment last Friday we believed we were seeing it but without steadfast commitment from Germany to expanding the European Stability Mechanism, expect confidence to continue to wane.
"With growth expectations for 2012 looking exceedingly gloomy there is more pain to come from Europe. We're currently looking at a two speed pseudo-federal Eurozone controlled by a rather fragile looking Franco/German pact. The feeling now is that this could all end in tears. On austerity measures the Greek tragedy has become a disaster and the only embattled country in the Eurozone getting its act together appears to be Ireland. "Further afield, noises from the Chinese Central Economic Work Conference are that they want to ramp up duty on imports. This will only pile on more misery on the Eurozone, their largest trading partner.
"Let's hope for something to cheer about next week in the run up to Christmas."
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