This morning the FTSE is adding to the losses made last week as investors focus on the US debt problems once again after a weekend that bore no fruit in the respect of an agreement on how to slash their government spending. 

Does it really come as much of a surprise that after agreeing to raise the debt ceiling on the condition of an agreement on spending cuts this month, that we get to the next deadline and guess what – political wrangling! Investors are really getting tired of politicians’ inability to deliver and here again we have an example of a stalemate.  The last thing this fragile market needs is more instability from the World’s Biggest economy just as we did in the run up to them raising the debt ceiling, and we all remember what happened then as a result of leaving it down to the wire – the US were quite rightly downgraded by S & P.

The markets never forget and investors remember the volatility this instilled across equities. Selling has taken us back below the 5400 level which had managed to hold up so well and this is negative from a technical point of view.  This has opened up the way to a possible test of the low 5200 region if we go below 5270 and a test of 4800 can’t be ruled out if we carry on down from there.  At the time of writing the FTSE is another 80 points or so in the red at 5280 and has been falling steadily throughout the session so far.

Equities are not a happy place to be right now with so many uncertainties shrouding the market in doubt.  The landslide parliamentary election victory for the conservative People’s Party in Spain seems to have appeased the bond markets for now, but this morning’s sell off is being driven by the wider concerns of the overall debt situation affecting not just Europe but the US as well.

Economic data is thin on the ground today with only US existing home sales for us to get our teeth stuck into.  Home sales in the US have held up pretty well throughout 2011 but are expected to show a little dip just this time for the month of October.

With equities sharply down this morning, FX traders are also in no mood for taking risks either, so we have seen a hike in the safe havens that are the dollar and then yen.  The euro has fallen steeply against the dollar this morning, from its price on Friday at 1.3616 to its current 1.3450 level.  Until the US congressional committee announce later today whether they can agree on deficit cuts, we can still expect to see uncertainty and potential weakness in the EUR/USD.  Support and resistance is seen at 1.3425/10 and 1.3540, 1.3615/95 respectively.

With gold prices struggling to get above the 1800.0 mark, market bulls and bargain hunters found themselves getting their fingers burnt yet again on Friday.  It seems that before gathering enough momentum to breach this psychologically important level, a lot of the weaker long positions in the precious metal are going to find themselves washed out.  The yellow metal found itself hanging on for dear life on Friday, and closed the session with little gain at 1723.1, which at time of writing has been wiped off, as it sits at 1714.1.

The impressive rally that has been engulfing crude of late came to an end in Thursday’s session and Friday gave investors a chance to catch their breath with not much happening. At time of writing, the Brent contract is trading down slightly at 107.35, as market traders have been pondering over the slowdown in economic growth in Asia and the report from Japan that exports have seen a decline, both factors that add pressure to the price of black gold.