Market Watch: Anxious focus on banks’ recovery despite moves to safeguard euro

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BANKS will remain in sharp focus this week despite the reduced hours of trading over the Christmas period. The banking sector has been one of the big winners on the stock exchange, up more than 30 per cent so far this year but still not touching the highs of 2011.

Michael Hewson, senior market analyst at CMC Markets UK, said: “The banking sector has had a fairly positive few months since August since the announcement by the European Central Bank of the new bond-buying programme, the Spanish banking bailout and moves towards a European banking union, which to all intents and purposes appears to have removed the short-term risks of a messy disintegration of the euro and collapse of the European banking system.”

Looking to the year ahead, Hewson added: “There remains the risk of continued uncertainty in the euro area in 2013, which could see bank share prices remain choppy, especially if economic conditions remain difficult, particularly in Spain and Italy. One thing seems certain – given the tight funding problems – financials will continue to remain volatile, while a recovery in Asia is more likely to help HSBC and Standard Chartered than the others, further regulatory scandals notwithstanding.”

Meanwhile, Prime Markets has issued “buy” recommendations on mining giant Anglo American and credit reference agency Experian.

Highlighting Anglo’s “particularly miserly rating for a mining group”, head of dealing Richard Curr said: “The benefit for those bottom-fishing the stock is the attractive risk-reward­ profile within a historically volatile sector, which will be further enhanced once the rumoured break-up, sell-off or kitchen sink options start to play out.”

Prime Markets highlighted Experian’s “consistent fundamental performance”.

Tomorrow: Half-day trading

Tuesday: Market closed

Wednesday: Market closed

Thursday: Gem Biofuels (AGM)

Friday: Mobile Streams (AGM), Diamond Circle Capital (EGM)