It’s not a pretty start to the week with a sea of red hitting traders screens this morning, in particular the French market which is being absolutely battered. 

France’s Cac index has now breached it's lows from August and is only 15% or so off the lows it formed back in March 2009 following the last banking crisis (to compare against the FTSE, it is over 30% off the same lows). Note I say “the last banking crisis” as the current situation could almost be placed in the same category with the eurozone crisis continuing to worsen day by day.

UK papers are full of headlines about the Vickers report on banking that’s due for release today and will recommend that the banks should be split up (nothing new then), costing the industry dearly (as if the life blood of our economy hasn’t suffered enough changes of recent), so the likes of RBS, Lloyds and Barclays are all lower by around 5%, but this is dwarfed by the crisis in Europe where many banks are lower by well over 10%.  We can expect a downgrade to French banks from Moody’s this week, the credit ratings agency that’s had them on review for the last three months.  Their banking sector is one of the most exposed to Greek debt and when you have rhetoric changing from not “if” the Greeks default to “when” then investors are going to push the sell button and push it hard.

All this will be making things even worse for confidence which is seriously beaten up as it is already.  With the markets tumbling and bank stocks taking the brunt of the selling it’s going to make getting finance for individuals and crucially, businesses, even harder.  The most recent BDO survey on business confidence showed it has hit its lowest level since June 2009, which doesn’t make good reading for an economy that is flat lining.

So the sell off this morning has brought the FTSE down to 5100 at the time of writing just above it's lows.  Key near term support is at 5050 which looks dangerously like being tested, meanwhile to the upside resistance is rather further away, expected at 5200/85 and 5325.

Following on from the back end of last week the shorters are still the main players in the market trading the euro.  It is trading at almost a seven month low against the dollar, but more astonishingly, it's lowest since 2001 against the yen.  After all the talk last week of the German court deciding that funding the Greek rescue is legal, it appears now the euro zone is preparing for a Greek default.  The euro is now trading against the dollar at 1.3559 which is below its new resistance level of 1.3650, so traders should watch for further potential downside. 

Friday morning’s session saw gold lose a lot of ground as the greenback strengthened and therefore the precious metal was more expensive in dollar terms. It struggled to stay down though as concerns over Greece defaulting on its debt obligation flared and equity markets felt the brunt of this, with investors pulling their money out of riskier assets and throwing their cash into safety havens. The yellow brick ended the day down 13.7 dollars at 1855.5. At time of writing though, despite the falling equity markets, gold still seems to be out of favour, as it’s trading down further at 1835.0.

Black gold’s inverse correlation with the US Dollar was apparent on Friday as traders put their money in the rediscovered currency safety haven, seeing as the Swiss franc has now been capped and no longer has that hedging appeal. So as the greenback rallied, Brent slipped off and ended the day just over 150 ticks lower at 112.58. The losses are being extended at time of writing though, with the commodity trading down further at 110.91.