rather than pick out individual stocks to trade, it can often be worthwhile to trade the indices themselves, especially in times of high volatility.

for those so inclined, i attach below charts for FTSE and FTSE 250, though one might equally be tempted to trade Dow or S&P, which is significantly broader in its coverage, or even NASDAQ

for ease of reading, i have attached 1 year and 3 month charts in each instance

hmmmmmm...

The headquarters of Bank of China (BOC) in Beijing. The biggest risk for mainland banks lies in securitized euro-denominated debt, according to Li Jianjun, an international finance analyst at BOC. [Photo / China Daily]


Analyst warns that potential losses for nation's lenders remain unclear

BEIJING - Chinese banks should prepare technically and strategically for a partial break-up of the eurozone, said an analyst at Bank of China Ltd (BOC) on Wednesday.

The biggest risk for Chinese lenders lies in securitized euro-denominated debt, said Li Jianjun, an international finance analyst at BOC, one of the four biggest State-owned lenders by market value.

"That will be a big problem, because banks have to clear up not only euro debt but also related debt if the situation worsens," he said.

An exit of some weaker members from the eurozone might be the worst-case scenario, but market participants are already preparing, even though government officials in the zone continue to deny the possibility of that outcome, Li said.

He said that although Chinese lenders have become more prudent since the start of the sub-prime crisis in the US, they still held such debt.

"BOC might not be the worst-affected Chinese bank in the worst-case scenario. It's still unclear how much the country's lenders will lose if some economies start to use their own currencies instead of the euro."

As the most internationalized Chinese lender, BOC was included on a list of 29 globally systemically important financial institutions in early November by the Financial Stability Board, an international policy coordination organization.

"Undoubtedly, the global foreign exchange market, which is valued at $4 trillion each day, will suffer great shocks if the eurozone partially breaks up and the whole trading system changes."

The Wall Street Journal reported last week that at least two global banks had taken steps to install back-up technology systems that could handle trading in the former European currencies.

The newspaper said that banking regulators in the UK and US had asked major banks to update their levels of preparedness in recent weeks.

British media reported on Monday that the UK Treasury was working on a contingency plan for a potential euro meltdown that includes capital controls. Banks in the eurozone placed a record amount of overnight funds at the European Central Bank (ECB) on Wednesday, a sign that they are increasingly wary that each other might default.

"The possibility of any exit from the eurozone is still quite limited, judging from the current situation, as the ECB already took some loosening measures," said Tang Jianwei, economist at Bank of Communications Co Ltd.

Last week, the ECB agreed to lend 523 euro area banks a total of 489.2 billion euros ($639.5 billion) to ensure lenders have enough liquidity.

Wang Tao, head of China economic research at UBS Securities Co Ltd, said the ECB is likely to undertake further quantitative easing to cope with the debt crisis. "But without a fundamental reform across the euro area, the moves may not be enough to stabilize the market."

"A break-up of the 17-member state Euro Area, even a partial one involving the exit of one or more fiscally and competitively weak countries, would be chaotic," according to Willem Buiter, chief economist at Citigroup Global Markets Inc.

An exit, partial or full, would likely be precipitated by disorderly sovereign defaults in the fiscally weak and uncompetitive member states, whose currencies would weaken dramatically and whose banks would fail.

There would be a collapse of systemically important financial institutions throughout the European Union and North America and years of global depression if Spain and Italy were to exit the euro, he said.

FTSE v DOW.

gibby

Thanks for that. A good article. The Stock Market is always telling you what is going on and I personally have never seen conditions so bad even allowing for 2007/8. Unless you spread bet a large amount per point it is getting impossible to make money on shares alone because the whole system has frozen-up again and the wise amongst us are out of it (I wish I was!) Who knows what is going to happen in 2012. It appears that even the B of E don't. King has said he doesn't know what will happen each week let alone in the future. I might be wrong and I hope I am but for me, a depression is well and truly on the cards and for those that grumble that an AIM company has found oil and thier sp doesn't rise should remember that.

All bets are really off at the moment until the picture becomes clearer. Maybe this is the worse and things will improve early '12 but I for one wouldn't bet on it!

..FTSE Sees £90.5bn Wiped Off Value In 2011

By (c) Sky News 2011 | Sky News – 45 minutes ago

London's FTSE 100 (Euronext: VFTSE.NX - news) has closed for the last time in 2011 - a year that has seen £90.5bn wiped off the value of the index.

The FTSE gained 5 points on the final half day of trading, but still ended 5.6% down compared with the start of the year.

"I think many in the City will be glad to see the end of this year - and hope 2012 will bring something a little bit better," said Manoj Ladwa of ETX Capital.

Markets analyst David Buik said the index could be seen as "a barometer of sorts".

"Against the DAX (Xetra: ^GDAXI - news) in Germany and the CAC (Frankfurt: 924169 - news) in France it has performed very well - we're only down about 6%, while the DAX is about 17% and 13% for the CAC.

"Based on the fact those are two small indices, in terms of numbers of companies with only 30 or 40, mainly financial - need I say more."

The euro was poised to end the year at a 15-month low against the dollar after it shed more than 3% on Thursday.

With fears over the future of the eurozone, analysts say it could drop even further in 2012.

And that continuing crisis threatens to contribute to causing an expected so-called mild recession in the UK.

However, the director-general of the CBI painted a more optimistic message for the economy in his New Year statement, suggesting that 2012 could be the beginning of a more prosperous future for the UK.

John Cridland said: "2012 is going to be a hard road but if we are canny and act now to put in place solid economic foundations, we will be stronger and secure a better future for ourselves and our families.

"We need to identify how the UK will earn its living and pay its way in the years ahead and that means adjusting to change.

"The faltering recovery with family and business budgets under pressure and the ongoing crisis in the eurozone are stark reminders of the need to rebalance our economy away from household and government debt."

The CBI said that the unprecedented economic stability between 1993 and 2007 masked "growing imbalances" in the UK economy, which has become dominated by debt-driven household and government consumption.

..

..UK Economy In 2012 'Impossible To Predict'

David Schwartz, considered amongst the most eminent of financial historians, has told Sky News that for the first time in 20 years he's unable to make a prediction for the economy in the year ahead.

"This is the first time in almost two decades where I've found it very difficult to make a call as to where I thought the stock market would finish up towards the end of 2012," he said.

Mr Schwartz suggests that the UK finds itself caught in the middle, between an improving US market across the pond and ongoing uncertainty across the Channel.

On the latter of these, he is particularly critical of European politicians.

"As we all know they have fumbled and blustered and done very little in 2011. Our stock market fell steeply because of that and there is every likelihood that we'll have the same problem in 2012."

He went on: "...the treaty that is supposed to be signed in March - we all know it ain't gonna happen.

"Negotiations will go on for months and months and that will unnerve investors."

But he predicts that particular negative pressure could be counteracted by positive news from the other side of the Atlantic (Stuttgart: A0J3C9 - news) .

"The US economy is beginning to recover which will boost Wall Street and we (the UK) often follow the Wall Street trend.

"A lot of investors from this side of the Atlantic have money in Wall Street and a lot of US investors have money here in the UK market, so the two stock markets often move in the same general direction."

Mr Schwartz believes the best outcome for the FTSE would be for European leaders to reach an agreement for the Eurozone that was accepted and trusted by politicians, economists and the general public. Something that has proved elusive thus far.

Were this to happen, he added: "The FTSE will rise by 15 to 20% during the course of the year. There is a potential for a tremendous rally in the year ahead if European leaders finally do the right thing."

..

Plus Mkts...

The junior London stock market said the offer – from an unnamed suitor – was "unattractive at a strategic level" and did not "recognise the current or future value of the unit".

The news came as Plus revealed that it had parted company with Clive Connors, head of the derivatives business.

In a statement, it said: "Mr Connors' employment was terminated by Plus on December 19, 2011. The board has taken the decision to revisit Plus-DX's strategy in response to the requirements of stakeholders and prospective customers and to facilitate its launch in the context of a financial crisis within the eurozone and worldwide economic uncertainty."

"The board remains committed to launching Plus-DX and intends to recruit additional staff from inter-dealer broker backgrounds to support its strategy," the group added.

Plus-DX received regulatory approval from the Financial Services Authority in August. The group had hoped it would become a significant player in the over-the-counter interest-rate swap market but the unit has since struggled to find clients willing to use its services.

Fed Says Dealers Tighten Terms on Hedge-Fund Security Trades
QBy Scott Lanman and Matthew Leising - Dec 29, 2011 11:15 PM GMT .
inShare.14
...Wall Street dealers made it tougher for hedge funds to finance trading of securities and derivatives in the three months through November, a Federal Reserve survey showed today.

Responses “indicated a broad but moderate tightening of credit terms applicable to important classes of counterparties,” especially hedge-fund clients, trading real estate investment trusts and nonfinancial corporations, according to the quarterly survey of senior credit officers at 20 dealers covering the period of September to November. The central bank released the report in Washington.

The report adds to evidence of stress in the financial system from Europe’s sovereign-debt crisis. Investor concern about the continent’s turmoil has helped drive the premium banks pay to borrow dollars to the highest in more than two years. The Fed survey didn’t discuss causes of the tighter financing terms.

Respondents reporting tougher borrowing terms for hedge funds “most frequently pointed to a worsening in general market liquidity and functioning and to reduced willingness to take on risk and, to a lesser extent, adoption of more-stringent market conventions and deterioration in the strength of counterparties as the reasons,” the Fed said.

Credit Limits
The Fed’s Senior Credit Officer Opinion Survey on Dealer Financing Terms was conducted from Nov. 15 to Nov. 28. Respondents, who aren’t identified, “account for almost all of the dealer financing of dollar-denominated securities for nondealers and are the most active intermediaries” in over-the- counter derivatives (OTCDTOTL) markets, the Fed said.

Measures of stress in credit markets soared during the three-month period surveyed to the worst levels in more than two years as Europe’s fiscal imbalances intensified, fueling concern that the region’s upheaval would taint bank balance sheets globally,

The U.S. 2-year swap spread (USSP2) rose 40 percent in the three- month period to 41.55 basis points as of Nov. 30 after peaking at 59.25 on Nov. 22, according to data compiled by Bloomberg. The difference between the two-year swap rate and the comparable-maturity U.S. Treasury note yield expanded to 48.63 basis points today.

Another signal of weakness in the banking system, the spread between the three-month London interbank offered rate, or Libor, and the overnight index swap rate, has more than doubled in four months to 0.49 percentage point today. That’s the widest since May 2009, as financial markets were still recovering from the collapse of Lehman Brothers Holdings Inc.

Interbank Lending Divergence
While the Fed said today that 80 percent of dealers reported lowering credit limits for some specific financial- institution counterparties, evidence grew that banks were growing more wary of lending to each other.

The gap between the highest and the lowest rates that banks say they can borrow from each other in dollars is close to a 2.5-year high.

The divergence from reported fixings by the 18 banks contributing to the three-month London interbank offered rate reached 28 basis points today, within two basis points of the widest since May 2009. Libor (US0003M) for three-month loans climbed to 0.581 percent, the most since July 2009, even as central banks injected cash into the market.

U.S. economic data released today may point to some easing of terms for bank customers as the world’s largest economy improves. Companies cranked out more goods in December and pending sales of existing homes jumped in November for a second month.

‘Signs of Life’
The Institute for Supply Management-Chicago Inc. said its business barometer (CHPMINDX) was little changed at 62.5 from a seven-month high of 62.6 in November. The index (SPX) of signed contracts (USPHTMOM) to buy previously owned houses rose 7.3 percent after climbing 10.4 percent the prior month, the National Association of Realtors said. Both figures surpassed the median estimate of economists surveyed by Bloomberg News.

“2011 is ending on a solid note,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, who forecast a reading of 63 for the Chicago index. “Manufacturing has some momentum,” he said, and “we’re starting to see some signs of life in housing.”

Combined with a drop in firings over the past month and improving consumer confidence, the data show the world’s largest economy may be strengthening enough to fend off major damage from the European debt crisis. Stocks rallied, buoyed by the stronger-than-projected readings and by a decline in Italian borrowing costs and a benchmark gauge of U.S. company credit risk dropped to a three-week low.

Corporate Credit Risk
The Markit CDX North America Investment Grade Index of credit-default swaps, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, declined 2 basis points to a mid-price of 119.9 basis points at 4:52 p.m. in New York, according to data provider Markit Group Ltd.

The swaps index, which typically falls as investor confidence improves and rises as it deteriorates, has declined from 127.8 on Nov. 30. It rose from 114.5 at the end of August to 150.1 on Oct. 3, the highest level since May 2009.

Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt.

The Standard & Poor’s 500 Index climbed 1 percent to 1,263.02 at 4:33 p.m. in New York. The yield on the benchmark 10-year Treasury (USGG10YR) note fell two basis points, or 0.02 percentage point, to 1.9 percent, according to Bloomberg Bond Trader prices.

Dealer Report
The Federal Reserve began querying dealers in 2010 as part of efforts to boost surveillance of financial markets following the panic of 2007-2008 that caused the worst economic downturn since the Great Depression.

The prior survey, covering June through August, showed that 86 percent of respondents reported that the number of dealers tightening financing rates outnumbered those easing.

The latest responses “reflect an apparent continuation and intensification of developments already in evidence in the September survey,” the Fed said today. About one-third of respondents tightened pricing terms, such as financing rates, to hedge funds, while one-fourth reported tightening nonprice terms including maximum maturity, the central bank said.

Hedge Fund Leverage
At the same time, more than half of dealers “indicated that hedge funds’ use of financial leverage, considering the entire range of transactions with such clients, had decreased somewhat over the past three months,” the Fed said.

The Fed survey also found that liquidity and functioning were little changed in the U.S. Treasury securities market since the second quarter, while one-fifth of respondents said equity- market functioning had “deteriorated somewhat.”

The European Central Bank’s balance sheet ballooned this month to a record 2.73 trillion euros ($3.53 trillion) on a surge in loans to financial institutions. The ECB last week awarded 523 banks three-year loans totaling 489 billion euros to encourage lending to companies and households and prevent a credit shortage.

The Fed’s balance sheet (FARBAST) has also increased this month to a record, reaching $2.92 trillion last week, on dollar loans to European banks through currency-swap lines.

The ECB this month cut its benchmark interest rate to 1 percent, matching a record low, as the debt crisis threatened to engulf Italy and Spain, the euro area’s third- and fourth- largest economies. The Fed has been considering further measures to ease U.S. borrowing costs and protect the economy from the European turmoil.

To contact the reporters on this story: Scott Lanman in Washington at slanman@bloomberg.net; Matthew Leising in New York at mleising@bloomberg.net

To contact the editors responsible for this story: Carlos Torres at ctorres2@bloomberg.net; Alan Goldstein at agoldstein5@bloomberg.net

Just to make sure the FTSE continues up, I've just gone short on the DOW @12,427 :-)

new we could rely on you skinny...lol

Indicative of the High Street? Down on 5% Trading Statement.

no - go and read the trading statement which was surprisingly strong .... this is profit-taking, though i would still avoid high street retailers (especially fashion) like the plague

cynic - I have - "in line" is about the best that can be put on it.

NEXT Brand sales were up 3.1%, in line with the full year guidance range given in November of between 2.5% and 4.0%. The strong performance of NEXT Directory continued to compensate for slightly disappointing NEXT Retail store sales.

Analysis and Outlook for 2012

Despite a good final week before Christmas, November and December sales were disappointing given that snow adversely impacted sales in 2010. A number of factors have subdued sales in the final quarter and it is hard to judge to what extent warm winter weather and higher levels of competitor discounting masked the deeper, longer lasting, economic effects. There are positives and negatives for the consumer, these are summarised in the table below:

ex reuters .....

Britain's No. 2 clothing retailer, posted an increase in second-half sales and kept its full-year profit forecast, justifying its strategy of not discounting prior to Christmas.

Kicking off the post-Christmas UK retail reporting season on Wednesday, Next, which has a long standing policy of never going on sale before Christmas, said it expected a year to end-Jan. 2012 pretax profit 7 million pounds either side of 565 million pounds ($883.38 million).

Next said total sales, excluding VAT sales tax, rose 3.1 percent year-on-year in the Aug. 1 to Dec. 24 period.

That compares with analysts' forecasts of a rise of 3-4 percent and an increase of 3.3 percent in the third quarter.[ID:nL5E7LS1YH]

Sales at its over 500 stores in the UK and Ireland fell 2.7 percent. But this was offset by a 16.9 percent leap in sales at its home shopping service Next Directory.

The firm said it was budgeting for modest growth in overall sales in the 2011-12 year with pretax profit only slightly up on 2010-11.

"We anticipate that Next will generate in the order of 200 million pounds of surplus cash after capital investment, tax and dividends which we intend to return to shareholders through share buybacks," it added.

Shares in Next, which have risen 37 percent over the last year, closed Tuesday at 2,737 pence, valuing the business at 4.68 billion pounds ($7.32 billion).

Construction PMI 53.2 v 51.8 consensus.

John Lewis sees 'outstanding' Christmas sales

having been prudent yesterday by banking profits in both dow and goog, i have just got brave and re-opened a long dow some 60 points below yesterday's sale

ezone...

LONDON | Tue Jan 3, 2012 4:46pm GMT

LONDON (Reuters) - A mass ratings downgrade of euro zone countries expected early this year is likely to increase selling pressure on French and Italian government debt, but could paradoxically consolidate Germany's safe-haven status.

Standard & Poor's has warned it could soon downgrade the triple-A ratings of Germany, Austria, the Netherlands, Finland, Belgium and Luxembourg by one notch and the ratings of other euro zone countries, including top-rated France but excluding Greece and Cyprus, by two notches.

If they materialise, and analysts say they are largely priced in, the downgrades would reinforce fears the currency union could collapse under the weight of member states' debt. This could inflict severe damage on even the bloc's financial powerhouse and perceived least risky country - Germany.

Its sovereign rating would fall below those of Australia, Canada or Sweden. But those countries' debt markets are much smaller than Germany's and will remain overlooked by investors seeking the safest bonds available.

A more liquid market is considered safer as investors can close an underperforming trading position more easily and limit their losses. At around 2 trillion euros (1.67 trillion pounds), Germany's gross debt is about 14 times that of Sweden in nominal terms.

Any German rating cut would rattle another pillar of the investment world after U.S. debt was downgraded in August.

"If (investors) are only mandated to invest in euros, then they've got nowhere to go. If they're allowed to invest in euros and U.S. dollars, well the amount of triple-A paper would still be zero," said Lyn Graham-Taylor, rate strategist at Rabobank.

"(The UK) is quite a small market and kiwi, Aussie (the New Zealand and Australian dollars) are also quite small so you wouldn't expect a huge reallocation simply because there isn't a large triple-A market left out there."

In face, Graham-Taylor said, German debt could outperform as it would benefit from outflows from elsewhere in the euro zone if France or other states suffered deeper rating cuts.

WIDENING SPREADS

The downgrades would almost certainly lead to a rating cut for the euro zone's EFSF bailout fund, which would hamper hopes it could become a credible institution, along with the European Central Bank, to help Italy and Spain.

The duo, as well as France, which is heavily exposed to them, could then be seen as more vulnerable.

"We possibly could see a bigger impact on peripheral spreads given that the market may question the viability of the EFSF mechanism," said Michael Leister, rate strategist at DZ Bank.

Investors are already bracing themselves for a world of lower-rated governments. French 10-year bonds yield 140 basis points more than German Bunds, compared with 40 bps six months ago and part of the widening was fuelled by expectations France will lose its triple-A status.

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Graphic of triple-A euro zone govt bond spreads: link.reuters.com/xaw94s

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

Despite the downgrades being widely anticipated, analysts say the spread widening trend in France and elsewhere has further to go in the absence of a solution to the debt crisis.

"Already quite a few investors in our client base have reduced exposure to a country like France. We already have a cautious stance on France ... It would not have an impact on our positioning," said Kommer von Trigt, a bond fund manager with Robeco Group, which manages about 140 billion euros.

But while it would not affect Robeco's funds, which are allowed do invest in any country, some of the group's clients may be forced to cancel their exposure to French debt because their investment rules mean they may only invest in triple-A debt, he added.

"It's very clear at least to us that French yields will continue to trade much higher versus Germany than two years ago," von Trigt said.

If Germany is downgraded as well, the triple-A benchmark will lose its significance, he said.

(Graphic by Vincent Flasseur, additional reporting by William James, editing by Nigel Stephenson)

The graphic from the above post.

Non Farm Payroll 325K consensus 176k

Skinny

So is that around 150000 more in work or out of work?