Our Dave hasn’t been making many friends in Europe recently and his speech at the World Economic Forum in Davos yesterday didn’t endear him any further. 

But he was only saying what a huge amount of business leaders, economists and analysts have been saying for months, if not years, which is that political leaders in Europe, those that wield the power, so France and in particular Germany, need to do more and fast in order to put a firewall around Greece and prevent contagion across the eurozone.  The first indication of contagion was shown this week with Portugal’s borrowing costs hitting an all time high and there’s a belief that they will be targeted next regardless of the outcome in Greece where the debt talks continue today.  As the French President Sarkozy has said in the past that he’s fed up with our Dave telling him what to do and he will definitely not have enjoyed the pragmatism of the speech.  Greek talks are due to conclude today but don’t be surprised if they continue into next week as we’ve seen all too often before delay after delay to the decision making.

So whilst the focus is on growth in Davos this year, there is also the touchy subject of executive pay.  This of course is being hotly debated here in the UK as the head of RBS takes another million as a bonus.  How can he, it’s a disgrace, where’s his moral compass, many people are crying out.  Unfortunately, the hard cold fact is that that’s what bankers are paid and he’s only taken two thirds of what he legally and contractually could have been awarded.  In effect Mr Hester is a civil servant and you can rest assured that banking crisis or no banking crisis, even if the bank was fully owned by the state, he would still be paid what he is today as a minimum.  Senior civil servants are paid large sums of money in order to keep them in the civil service because the state knows that most could go to the private sector and probably be paid more.  In the end if Mr Hester does his job properly then the two million a year we pay him will look very good value if he repairs the bank and we sell our stake for a profit.  So he might be a multi-millionaire, but the pressure is on him to turn the taxpayer’s investment into a profit.

This morning the markets are giving back some of their gains from yesterday as the rally in US markets fizzled out last night.  The retreat is seeing the FTSE open lower by some 20 odd points as the bulls take a bit of profit from the strong gains yesterday.  It was a real risk on scenario following the Fed’s announcement that interest rates are due to remain at their record lows into 2014 and you can safely say that a similar thing might happen here in the UK.  The buyers piled back into mining stocks as metal prices soared with gold and copper prices spiking.  With the 5800 level being tested this is the near term resistance level for the bulls with 5815 just above here also a target meanwhile to the downside 5740 and 5700 are seen as support.  Clients continue to sell into the strength in the FTSE and felt a little bit of pain yesterday however this morning at least the little bit of weakness comes as some relief.

The euro has enjoyed very decent strength this week but this morning, in line with the softer open for European indices, it is a little lower against the dollar.  EUR/USD is at 1.3095 at the time of writing having almost had a look at the 1.3200 level yesterday.  With the talks in Greece being dragged on and the agreement between the country and its bond holders expected today, traders just seem to be holding off to committing any new positions for now.  Support and resistance is seen at 1.3050/25 and 1.3145/85 respectively.

Gold was also in demand after its initial big spike on Wednesday then that strength continued through to yesterday as the yellow brick smashed through 1700 and onwards to 1730.  The profit taking across risk assets has filtered through to gold as well which is a little lower this morning to 1717.  The bottom line for gold is that if the US is thinking about more monetary easing, gold is a one way ticket and clients remain heavily long of the metal. Near term support and resistance is seen at 1703/1680 and 1730/1738 respectively.