The ongoing debate about whether a high speed railway should be built highlights many things that are wrong with this country when it comes to radical projects that are designed to improve the long term prosperity of the country. 

Any new such development is never going to please everyone, especially those who are going to have it plough through their back yard.  Tax payers will also rightly question whether the £32bn planned spending is worth the money, particularly when you can expect those costs to be much higher by the time the actual line is built and trains are running on it.  But in the long run the cost is one that is probably worth bearing as our aging rails need more than the patch work that’s been ongoing over the past few decades.  Another £10bn here and there has been the cause of delay after delay to rail passengers, added to the cost of rail travel and delivered nothing in added capacity for either extra passenger or freight traffic.

The real cost to the economy is the time it will take to deliver.  If we were a province of China the project would probably be over before the Olympics, however there’s going to be two or three years of haggling in the House of Commons before work can actually begin in 2015.  It will then take a further ten or so years to only get the track to Birmingham complete, so we could probably add another few contingency years in before even phase one is complete.  The time it takes to build these projects are the real stumbling blocks to economic recovery when now’s the time we need to be investing in the future of our infrastructure.  Roads and airports are only going to get busier, so a world class rail infrastructure will help in sharing the burden of this increased traffic.

A little bit of profit taking this morning gives the bulls time to reflect on the decent start to 2012 for equity markets.  It's interesting that our calls have not been higher ahead of the open considering that Asian indices continued their strength and the Aussie index made mild gains with mining stocks benefiting from higher copper prices.  At the time of writing the FTSE is just in the red at 5690 as it seems to be finding the 5700/20 area a bit of a struggle for now.  Over the medium to longer term this rally might have a little further to go as long as the indices remain above their 200 day moving averages on the daily charts, but the German Dax is yet to even achieve this, meanwhile the Dow has been comfortably above here since the middle of December.

The focus for UK equities this week has been the retailers that have been reporting.  Even though on the whole they have beaten forecasts, the sales have been driven by huge discounting and prolonged sales, which in turn have eaten into profit margins.  This is leading them to cut costs and its likely we’ll see the not profitable part of the year for retailers, so the first half, leading to job losses across the sector.  The overriding concern and difficulty for them is that the outlook for the UK consumer remains very bleak, even if macro data has surprised to the upside.

The euro’s downward trend looks to be continuing and is capped by a downward trending line.  EUR/USD is 1.2770 at the time of writing and can’t seem to gain any traction from the decent bout of risk appetite in equities that we’ve seen so far this year.  For now though the declines seem to have been halted somewhat as the action in Europe is now picking up again following the break for Christmas and New Year.  With lots of summits coming up there might be a respite in the selling of the euro but as mentioned for now the single currency remains the dog of the FX markets.  Near term support and resistance for EUR/USD are seen at 1.2700/2660 and 1.2790/2815 respectively.

Gold is creeping ever higher giving the bulls hope that we might see a test of the all time highs set back in August and September last year.  At 1646 this morning upside targets are seen at 1650/60 meanwhile to the downside 1623/04 are seen as support.