European markets flat bank weakness cancels mining strength

Selling in key UK banking firms such as Royal Bank of Scotland and Barclays weighed on strong gains in the mining sector, leaving the FTSE 100 Index relatively flat in trading on Thursday.

Banks vs Miners, round one
Most traders have been fixated on these two sectors which have dominated the headlines today.

The miners have bulled their way higher with some traders using yesterday’s weakness as an opportunity to pick up some of the key miners at lower prices. Mining sentiment has been helped by data out of China which showed that industrial production grew by 13.1% in October. A bullish note of the sector from Bank of America/Merrill Lynch is also underpinning gains today too.

However, much of the market is fixated on speculation over the situation with Irelands debt and of the potential domino effect it could have on key UK banks such as Royal Bank of Scotland that have high exposures to the region.

Royal Bank of Scotland’s shares has been hit the hardest on the back of the Irish fears. Some market analysts have estimated that the UK bank has exposures roughly totalling £42.2bn worth of Irish debt and so any escalation of its current problems could create a domino effect amongst those banks that have a direct or indirect association with its debt. Irish bond yields have surged on the uncertainty over Irelands ability to bail out its banks without help from the IMF.

With there being a lack of macro economic data due out today too, this is making matters worse for the banks as it leaves traders with little to react to apart from the growing speculation over sovereign debt in Europe.

G20 eyed
The G20 summit in South Korea is also being carefully watched by the market today and specifically if there are any in roads to the protectionist methods deployed by some countries in an effort to devalue their currencies.