There's still a bit of a tech wreck going on in the wake of the Nasdaq weakness. The other problem is that we haven't had good sector rotation and we've seen a bit of a sell-off in the banks. The results for the banks have not been too good - they are facing margin pressures.
There are two key challenges to the U.S. market: one is Fed policy -- and it's still our concern that the Fed will be increasing rates this side of Christmas; secondly, it's the slowing corporate earnings outlook. Although corporate earnings are still probably going to rise, I think there's a concern that numbers may come in below consensus and drive the markets down.
Service-sector inflation has been picking up. Wage inflation has shown some signs of picking up so, unlike the U.S., [Britain] does have some worrying signs of inflation.
This could finally lead to a sell-off in U.S. equities. And then European stocks would mirror falls on Wall Street.
Given what's happening in Europe, which could be a knee-jerk reaction to what happened in the U.S. Friday, we're probably going to be down again (in the U.S.). What's been happening is that investors have a burst of energy for a week, then it starts to unravel.
This thing has been bid down and down. But I think on fundamentals now, taking a two to three-year view, people have got more comfortable with the level that we're paying.
London's trading is probably more closely linked to that of Wall Street than the other markets in Europe.
It needs a further catalyst to boost the market.
Over the last couple of months the market has done relatively well and is now pausing to consolidate the gains.
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