Negative fog descends on European equities

With US markets closing on their lows, as well as high volume selling in Asian markets, it’s not surprising that a rather bleak negativity has made its way into European trade this morning. 

With the 6500 level once again abandoned, only 12 of the FTSE 100 constituents are in the green as defensive utility stocks are seeing most of the marginal upside action.

In recent days the number of market participants jumping on the ‘Dectaper’ bandwagon has notably increased. This turn of events can in part be attributed to the potential passing of a US budget deal, which would avoid another government furlough in January. Coupled with the better economic data emanating from the US recently, this does tend to cement the viewpoint that asset purchasing could be scaled back this month.

Services company John Wood, which had its share price target cut by Credit Suisse from 900p to 850p, has given up 10% this morning and takes the bottom rung of the FTSE ladder.

Normally the likes of Finland and Estonia go largely ignored when it comes to newsworthy eurozone-related stories, so the fact that both country's central banks have slashed their GDP forecasts for this year and 2014 indicates that the crisis is by no means behind us. This morning's comments from Mario Draghi offered little new insight when he anticipated a period of low inflation; let's face it, low growth seems inevitable regardless of the monetary policy tools certain European Central Bank members purport to have in their possession.

Later this afternoon, retail sales and jobless claims will be given a great deal of attention; any better-than-expected releases could well see global indices mount further losses. Retail sales are expected to show an increase of 0.6% in the month; while jobless claims are likely to increase from last month’s 298,000 to 321,000.

The idea that a Santa rally might extinguish current declines seems a little delusional right now, yet, given the performances of equities year-to-date, profit-taking seems like the safer option.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.