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The good sentiment focused on global asset classes on Thursday weakened on Friday and has all but evaporated over the weekend. Stock market speculators were quick to cash in gains seen during Thursday’s training session and bank profits before the weekend.

Over the weekend it emerged that the Chinese government had failed to cover a debt auction for 35bln Yuan (roughly $5.1bln) for only the second time in 6 years. This over concern that the stimulus package launched by Wen Jiabao will cause inflationary bubbles in the country’s housing and stock markets and therefore for interest rate rises will occur later down the track. A blow for China is a blow for global confidence and as such overnight trade has seen Asian markets take a pasting.

The Nikkei finished 2.55% lower this morning as oil prices fell to an 8 week low. The news that Kim Jong-Il, the North Korean leader and Premier world nutcase, is suffering from pancreatic cancer has heightened geo-political risk and uncertainty also

We were correct on Friday that the Michigan Confidence figure would leave the market feeling bearish in the afternoon session and we are still confident that GBP falls against USD in particular are nearly upon us.

With a lack of data and corporate earnings markets are likely to slide lower over the course of the day with risky assets being hardest hit.

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