The markets can’t get the momentum they need to get this year’s Christmas rally underway.

The markets remain depressed by the prospect of a difficult year ahead with banks needing to further deleverage and build greater capital reserves at a time when liquidity will be vital in keeping our economies going.  The eurozone debt crisis isn’t getting any better either so the outlook is bleak to say the least.  With banks being hit from all angles as the Basel III safety buffers are due to come into effect from 2013 and the Vickers report set to be implemented to ring fence retail and “casino” banks, increasingly the investment banker is being confined to the history books.  Boy George’s olive branch to the likes of HSBC and Standard Chartered yesterday may go some way to persuading them to stay in the UK, but with full implementation not due until 2019 there’s no question that the rules will change again before then and probably be watered down.  They will have to also comply with any changes in Europe as one rule for UK banks won’t necessarily work when there are different rules for other banks.

The sad reality that the UK taxpayer is going to have to get used to is that our “investment” in RBS is unlikely to see any sort of return.  As we saw with Northern Rock recently the taxpayer made a loss, but less of a loss had the sale gone ahead any time in the future as the value was slowly being depleted bit by bit until eventually there may not have been a buyer at all.  With RBS it’s a similar story.  For as long as the government holds its massive stake in the bank it will continue to have its wings clipped and returns will be much smaller than during the boom years.  We may be holding onto our stake for many years to come as with many investments that go wrong, a short term one can suddenly turn into a very long term one.

The FTSE’s in the red at the time of writing having opened in negative territory and stayed there at around 5330.  The only small piece of good news this morning is that of a Nationwide consumer confidence measure which came in higher than expected, however this rise is from a record low since 2004 and it is still way below its long term average.  The bounce could be down to the lower inflation expectations however it may not last long with unemployment continuing to rise and growth expected to remain flat.  It will be interesting to see how the Gfk consumer confidence figure comes out overnight.

No surprises the euro started the week on a downer after Europe failed to stump up the €200bn they need to bailout eurozone governments.  The coup was €150bn which of course, doesn’t include the €31bn demanded of the UK, after Cameron vetoed the EU treaty plan.  Finance ministers are now relying on countries such as Sweden and Poland to put their hands in the pockets and help out with contributions.  If we actually take a step back though, we realise that even if the €200bn had been raised, it wouldn’t make a difference since Italy alone need €300bn in refinancing.  This morning, the euro is slightly up against the dollar at 1.3012 with support at 1.2980 and resistance at 1.3050.

After breaking for air above the 1600.0 mark, gold found it hard to stay afloat and fell back to 1593.6, down 4.4 bucks for the session.  Most of the downward pressure was supplied by the strengthening US dollar, but also the ECB’s parrot-like rhetoric despite growing signs that markets are pricing in a return to recession.  Currently the yellow brick is trying to get that breath of air again and is trading at 1600.3.

Not surprisingly, the main driver in the energy sector was the instability seen in Asian markets yesterday, with the death of North Korea’s leader Kim Jong Il causing a bit of a stir. It still only helped Brent gain 4 ticks to close at 103.80 for the day, but perhaps the meeting in Rome today where many nations including the US and South Arabia will discuss sanctions on Iran’s oil exports, potentially disrupting future Middle Eastern supplies.