Equity markets continue to be strong albeit with the odd small sell off to keep us on our toes.

The unpalatable fact that continues to drive much thinking over investment allocations is what happens next. Interest rates are moribund so keeping your hard earned in cash is a quick way to having less of it (in real terms) at the end of each year (I am not talking about the small sums that can be deposited in the Abbey here). Bond markets are looking good with rates around 4pc for 10 year UK sovereign debt and slightly lower for Germany and France, not bad against circa 0.5pc 3 month Libor for sterling and 1pc for the Euro, but there is an unhealthy fear that bond ratings across the globe are due a correction.

Greece is now odds on to have a default of some sort requiring aid from the EU. Bond holders may get the majority of their money back in a default scenario but might well have to wait a bit. And this in itself will raise the ‘elephant in the room’ question. Are other member states really bound to come to the aid of fiscally irresponsible nations? If all Euro bloc sovereign debt is bailed out then this would devalue strong individual countries to the detriment of the whole?

Not only this but in any case with rates so low it is difficult to actually imagine anything other than a rising rate environment going into 2011/2012.

Commodities are not so much an investment area as a true financial casino and as such is generally the preserve of those with a very high risk level.

This is leaving the equity market as, currently, the only game on the block.

Cadbury has delivered its defence which was actually quite subdued in the circumstances. While we await a better offer from Kraft (or from Herchey, Nestle or whoever) the stock appears stuck at close to the 800p level. So far nobody seems particularly interested in bidding up and investors must now be concerned that the stock does a ‘Sainsbury’. If Kraft do not bid substantially higher, and one of their major shareholders (a certain Warren Buffet) has warned against overpaying then the bid may just fall by the wayside. For all of the talk of a white knight (and I am not sure from Cadbury’s point of view what the difference between a take over from Kraft and any of the other named potential suitors will make) non has so much as put the tip of their helmet above the parapet yet. Perhaps £10 bln in the current economic environment is a fair deal and the only deals getting done these days are those that give instant value to both sides.

Indices are opening unchanged on the off with the FTSE showing signs that today might be a rerun of yesterday’s abysmal trading range. After the Dubai announcement in the small hours of Monday effectively blew the FTSE’s powder whilst it was still asleep once the market had actually opened the trading range was covered for the whole day by a miserly 30 points. Traders will probably be looking to sell above 5350 (as they have done successfully in the past) and buy at around 5300 which is the first support level. The rising trend line for the long term rally is now at approximately 5230 and this rising line has held steady for two attempts last week. Punters are short the indices in general but admittedly not aggressively so and it is possible that the pressure from year end redemptions will keep a cap on window dressing buying for the time being.

Currency markets are getting ever more dollar friendly as the Euro struggles from both its high valuation and from the increasing fears over the viability of the entire euro project remaining in place. I speak as a fan of the Euro zone ‘experiment’, but as a commentator it must be admitted that the one size fits all sales patter is just not sustainable on a long term view. Several nations should never have been allowed in but politicians (who generally want ‘posterity’ over ‘prosperity’) were allowed to wave the whole “train set through onto the new rails” even though a few of the locomotives were operating on a different wheel gauge entirely. The dollar has the overriding advantage of history in its favour. The currency has been around for over two hundred years and is backed by what is still the biggest single trading nation on earth. The Euro is still very young and will no doubt continue to have the odd teething problem for decades to come. It is backed by Germany and France but these two are counterpointed by a raft of weaker nations who have significant ability to weaken the whole.

As we look around for the next ‘brick’ to drop a crisis of confidence in the euro project might be sneaking up on us.

Oil is also struggling to maintain its value as dealers seem unsure as to what to do. A few weeks ago $100 looked a distinct possibility but now we are flirting with a fall back into the $60 to $70 trading range. Nymex is now at 69.50 having had a peek at support at 68/68.50. Dealers will be watching for any evidence of a retest of $65 as this proved to be crucial back in August and September. On the plus side there is a swathe of evidence that suggests that economic activity is picking up (Australia is struggling to deliver the resources requirements) and so a full bear move in the black stuff does seem unlikely. Bulls will be hoping for a return above 73.30 and possibly 75.00 as a first indication that the upward momentum can be regained but it must be admitted that moves higher are getting more and more difficult.

Gold almost reached a 10pc retracement from the highs. Falling to $1109 from $1227. Much of this can be attributed to the minor strength shown recently in the Greenback and this must be of some worry to the Gold Bugs. As mentioned several times in recent comments gold relies for its sky high valuation on four things a weak dollar, low interest rates, fears over future inflation and fears for financial stability. If these pillars start to crumble then the way down could be very painful indeed. Rallies are getting harder (as with Oil) and are getting nowhere near retracing immediate recent falls. If bearishness resurfaces there will probably be a bit of a battle over 1110 to 1100 but there is little volume support below here until 1045 to 1060.