As traders in the city of London prepare for the G20 demonstrations on Wednesday, world stock markets have also started the week with trepidation. Most of last week’s dominant trends have slipped into reverse gear. Last week financials and oil lead markets higher while defensive stocks such as Tesco and Sainsbury’s were left behind. So far today it is the supermarkets that are holding up well while sentiment against the banks goes full circle.

UK financials are being led downwards by Lloyds and Barclays after SocGen put out a strong sell recommendation on the latter. SocGen believe that Barclays may still have to raise further capital, with Government assistance being the most likely source. With tomorrow marking the deadline for participation the government’s asset protection scheme and the sale of Ishares moving slower than hoped, investors have reached for the comfort of the sell button.

Other catalysts include Treasury secretary Geithner’s assertion that “Some banks are going to need large amounts of assistance” and the collapse of Dumfermline Building society. Dumfermline got into trouble due to the state of its residential mortgage loan book and disastrous forays into US mortgage securities. Lloyds may be trading down so hard in part due to the implications for it’s now toxic HBOS division which will have dealt in the same areas as Dumfermline.

On the currency markets, the pound is extending its losing streak against the dollar with the euro also a victim of the dollar’s resurgence. The G20 summit is expect to bring little of material impact so the next market mover may be Wednesday’s ADP employment change.

By David Evans of at betonmarkets.co.uk

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