No Santa rally in sight yet

In mid-morning trading the FTSE 100 is down just four points, lacking the more rose-tinted views of its European counterparts.

The FTSE 100, along with all the European markets, continues to suffer with the FOMC 'will they or won’t they?' cloud hanging over it. As the month of December has progressed, the percentage of institutional analysts who expect the US to start tapering has increased. Nevertheless, the consensus is still that it will wait until 2014, as any efforts to start this year would ultimately feel forced and could easily send out the wrong signal. These mixed messages have spooked the buy- on-dip traders, who at present seem reluctant to continue the ten-year trend of December rallies.

Royal & Sun Alliance has shocked the FTSE this morning with the news that its CEO, Simon Lee, has resigned. This was accompanied by a fresh profit-warning for the UK-based insurance company. Issues surrounding its Irish arm continue to drag on the company’s performance, with £135 million being pumped into the Irish business and £25 million set aside for European storm damage.

Strong figures from the housing companies continue today, with Bellway reporting that 31% of reservations are being made with the assistance of government schemes, helping boost its reservations for the year by 43%. The company expects profit margins to increase by more than 15%, and this should help it post solid profits come year-end.

December's relentless drift in the markets continued last night, as the Dow Jones, NASDAQ and S&P 500 all finished lower, with no sign of support appearing before next week’s FOMC figures. This afternoon sees the release of the inflationary US producer price index figures, and unless these differ considerably from expectations they are unlikely to cause too much of a ripple. A slightly more optimistic feeling has developed just before the weekend, and ahead of the open we expect the Dow Jones to start 34 points higher at 15,773.

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