The bulls have lost their swagger and after a week long stalemate, the bears appear to be winning recovery debate.

Financial markets have now broken out of last week’s unusually tight trading range, but unfortunately this break out is going in the opposite direction to the one most people want.

Deflation is back on the agenda after US CPI increased slightly less than forecast. As a symptom of this lower growth, scenario treasuries are back in demand and oil has slumped below $70.

Markets are close to major technical levels. S&P 500 futures are floating just above the 900 level and the Dow Jones is trading around the 8,500 point.

The FTSE is feeling the impact of some heavyweight stocks such as United Utilities going ex dividend and the Sainsbury’s cash call.

UK plc is on the defensive despite evidence that the rise in UK unemployment has eased. The pound is down against most currencies, especially the euro.

EUR/GBP Fixed Odds

The euro has recovered against the pound today, but the medium term trend is still against the European single currency.

A Fixed Odds No touch trade predicting that the EUR/GBP won’t touch £0.855 at any time in the next 7 days could return 225%.

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