Investors pause for breath and await raft of key data

Giles Watts, Head of Equities, City Index commented: "European equities drifted largely sideways with some muted bouts of profit taking in the morning session as investors paused for breath after yesterday's 1.5% gains.

There is certainly an eye on a raft of important data due out over the next 4 days also and this is making investors a little more cautious today. We have Pending Home Sales out this afternoon, FOMC minutes due tomorrow evening, a Bank of England rate decision on Thursday followed by the all important Non Farm Payroll data on Friday. Therefore, it is certainly a week where the macro front will demand much attention.

5500 psychological level

Having broken through the psychologically important 5500 level yesterday, the FTSE 100 immediately fell below this level upon opening and it has been providing some resistance to today's session. If we can close above this level consistently then there is every chance that equities could push on further and investors may be waiting for the macro front to help provide the boost to do so.

Banks lead - RBS/Barclays

The banking sector is leading today with RBS and Barclays both topping the winners list.

RBS is still demanding interest from investors as media talk of a possible stake sale to Brazilian lender Itau Unibanco gathers pace and yesterday's positive note from BNP Paribas is still having a positive affect. RBS shares have fallen 48% over the last 4 months so certainly there could be a few speculators bargain hunting its shares also.

Barclays is tracking the stronger sector but also benefitting from a positive note Deutsche Bank, who have made Barclays one of their top picks in what they expect to be a largely underperforming European Banking Performance for 2010. There has also been some speculation that the bank could lift its outlook and this is facilitating some further bouts of buying.

Next profit warning

Next shares are the heaviest faller in London, down over 2.5%, after the retailer warned that 2010-11 profits could be flat despite a better than expected Christmas sales performance. The retailer is being particularly cautious with its stock levels and despite saying they could bring in more stock if 2010 if sales prove to be stronger, the headline will be of a note of caution and this has convinced many to take some profits off the table, with share prices reaching a new 26 month high yesterday."