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The warnings reflect that the Banks in their respective domains are likely to need to report further write-downs and should therefore raise additional capital while the ‘going is good’. On the back of an already weak Euro, this caused a further dip in its value on opening this morning. Tough talk from ECB member Nowotny didn’t alleviate any European concerns. Having just sorted out problems in a few Banks in his own native Austria, he was less than accommodative in his remarks about indebted nations within the Eurozone. He said that there will be no carte-blanche bail-out of countries suffering beneath the burden of massive borrowings with his comments assumed to be directed towards Greece and its ever increasing problems. His policy view though was very dovish, saying that there was no need to raise interest rates and that Governments shouldn’t be looking to exit banking support measures. Euro/Dollar though, dipped to 1.4280 on market opening and after bouncing, revisited this level again in early London trade. The next real support for the Euro looks to be at the current 200 day moving average, which is presently at about 1.4170, and with the SNB still sniffing around in Euro/Swiss at levels below 1.5000, it might be that this will be a move too far and that we will see a bounce for year end.

News from the UK was mixed with the CBI warning that the economy will face a very long ride out of recovery with only very modest growth emerging through next year. They did warn however that the growing threat of inflation will cause the MPC to raise rates sooner rather than later with the official lending rate ending next year at 2010. The retail sector however produced some very strong figures leading into the Christmas holiday with £4 billion going across the tills this weekend alone. The fear is of course that this spending could be the final knockings of a dying sector with a massive cliff waiting going into the New Year on the back of still rising unemployment and prospective heavy debt repayments.

Considering the time of year, there is plenty of market relevant data out over the next few days. We get the revision for 3rd quarter UK GDP (market hopes for a positive revision) and the minutes from the last MPC meeting (pundits are looking for a neutral set of minutes following last month’s 3-way split vote on QE going forward). We also have German consumer confidence and a raft of data from the US (including their own GDP revision). Nothing today however, so on the shortest day of the year, I would expect to see the market continue to test the resolve of the SNB.

No data today from the Eurozone, UK or the US so expect Central Bank comment and speeches to be the catalyst for any moves.

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