European shares trade flat to lower with banks higher – IBEX continues to wobble

<p>Investors bought back into the main UK banks today, buoyed by the agreement reached over the weekend to hand Ireland an €85bn bailout. With several […]</p>

Investors bought back into the main UK banks today, buoyed by the agreement reached over the weekend to hand Ireland an €85bn bailout.

With several key UK banks maintaining large exposures to Ireland’s debt, the agreed bailout has helped to lighten the burden of uncertainty over the potential domino effect on banks should Ireland default on its debt. Therefore, the bailout is being seen as a short term positive for banks, helping to entice investors back into stocks such as Royal Bank of Scotland and Barclays after both banks suffered heavy falls of between 8%-10% last week.

However, there remains a large degree of uncertainty throughout Europe with investors refusing to buy into Spanish or Portuguese stocks fearing that these could be the next two states requiring a similar bailout solution to that of Ireland. In addition to this, nerves remain over the rising tensions in the Korean peninsula and undoubtedly the much headlined ‘Wikileaks’ publications of close ties between Iran and North Korea is maintaining a degree of political anxiety to trading sentiment.

Christmas rally or double top?
There is a general feeling that this week’s trading could be crucial in determining how stock markets finish the year. Having seen Indices across Europe consolidate around the 5% mark in the last few weeks, we are now at levels which, over the last six months, have attracted buyers. Should this trend continue and buyers start to re-emerge into the markets, it could set us up for a Christmas rally.

If the markets continue to correct however and the FTSE makes a consistent break below the 5600 level, we could confirm a double top has been reached and this will threaten a change in current trends.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.