European equities start in consolidation mode

Joshua Raymond, Market Strategist at City Index commented: "European equities started the week in consolidation mode with investors moving to cash in their profits after sharp equity rallies on Friday.

What we have seen is investors using last weeks gains as an opportunity to cash in their profits at the top end of the market. There is not much for investors to focus on at the start of this week apart from Wednesday's pre budget report and Thursday BoE Rate Announcement, and as such, trading has been fairly lacklustre.

However, equities have already moved to recover somewhat from earlier sharper losses and this encourages that today's consolidation may be limited.

The main targets of profit taking so far has been the mining and the banking sectors.

Miners

The US Dollar gained in strength on Friday on the back of the strong US jobs data and this has put pressure on metal prices and the price of Gold in particular. A stronger US Dollar has helped to trigger many investors to move some of their money out of the mining sectors and Eurasian Resources and Randgold have suffered as a result, leading today's losers list on the FTSE 100. If the price of the US Dollar continues to rally, this could put metals and miners under further pressure.

Banks

The banks are also weaker today, on the back of reports that the UK government could move to tax windfall bonuses at the UK's major banks. The move has been met with apprehension from investors who have moved some of their money out of the UK banks such as Royal Bank of Scotland and Lloyds as a precaution as we head into Wednesday pre Budget Report.

Treasury moves to tax banker bonuses

UK banks have been in focus today after reports that the Treasury are considering a windfall tax on banker's bonuses.

Clearly there is a strong election motive behind this move but there may also be significant underlying impacts on the City. If UK banks are handicapped in terms of the talent they are able to attract and also keep, they will be at a severe disadvantage to their European and US competitors and this could put a bump in the recovery road for the UK economy. This is why there is a slight apprehension in the City today and why the pre-budget report will be viewed with a keen eye by the UK banks."

For more information, visit cityindex.co.uk.