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Just over a month ago expectations that the FTSE could break above the 7,000 level were common, with the index trading less than 100 points away. However, the subsequent economic data out of Germany and dismantling of confidence has not only slaughtered European markets but dragged the UK down too.
We're only an hour or so into Monday's trading and this already feels like it will be a long week: ratings agencies are downgrading their outlook on France, Tuesday's German ZEW data is thought unlikely to inspire, the European Council is likely to reject the latest French budget and Thursday’s eurozone inflation figures are a real cause for concern. All these factors together look set to insure that the VIX Fear index will remain high; in fact the situation is so gloomy that gold, the flight to security, appears to have woken from its slumber.
Meanwhile, it's the quiet before the storm for US traders; although with the global turmoil surrounding them, it is debatable how enjoyable this Columbus Day bank holiday will be. Tomorrow will see the US reporting season kick it up a gear as the heavy-hitting US banks begin to report, with both JPMorgan and Citigroup posting before the US market open.
US Federal Reserve chair Janet Yellen will be glad she is not speaking until Friday, as it will give her a few days to gauge how deep the markets' panic is and enable her to include sufficient wriggle-room when the topic of US interest rate rises occur.
Ahead of the open we expect the Dow Jones to start 66 points lower at 16,478.