Stock take

Banker pay:A withering report from research outfit AlphaValue has found European banker pay rose by 12.5 per cent in 2010 and is 40 per cent too high compared to other industries.

This is “at odds” with the “savage” 86 per cent reduction in shareholder value between 2007 and 2011 and the fact that banks now account for just 11 per cent of the Stoxx 600, compared to 20-25 per cent a few years ago.

The report also notes that some bankers were recently considering return on equity targets of 15 per cent, even though investors and lenders craved less risk.

“These promises smacked of a complete misunderstanding of the real world” and suggest that governance “was just not up to the task”. Ouch.

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Some positives:The S&P 500 has surged by 14 per cent in a fortnight. Is the bottom in?

Maybe, maybe not. Fiercely volatile markets have seen five double-digit swings and eight swings of 7 per cent or more since July. The S&P is flat for the year but you’d be up by 16.5 per cent if you’d missed the three worst days of 2011.

Mind you, you’d be down 12.7 per cent if you’d missed the three best days.

Financials continue to lead the market and have been the best or worst-performing sector for 30 of the last 50 days. Rebound highs in August and September petered out at current levels. However, bulls see some positive technical signals.

Firstly, it’s the biggest of the many recent market rebounds. Secondly, market breadth is healthier – 79 per cent of stocks are above their 50-day moving average. No previous rally managed to surpass 44 per cent, with a minority of stocks doing the heavy lifting. Finally, the volatility index (Vix) has fallen below 30 for the first time since August 3rd, indicating fear is waning.

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Losses abound:The US markets have been the best performing of the G7 indices. Next best is the FTSE (down 8 per cent). Italy's Mib index has soared by almost 20 per cent in recent weeks but it remains the G7's worst performer, down by 21 per cent since January. France (-17 per cent), Japan (-17 per cent), Germany (-15 per cent), and Canada (-10 per cent) are all nursing double-digit losses, while the Brics (Brazil, Russia, India and China) are down by between 14 and 20 per cent.

As for the Pigs (Portugal, Ireland, Greece, Spain), the Iseq is outperforming. It’s down by 10 per cent, just ahead of Spain, while Portugal (-20 per cent) and Greece (-45 per cent) have been hammered. Just four countries have seen market rises this year. Unfortunately, it’s doubtful if many readers have much exposure to Venezuela, Botswana, Jamaica or Ecuador.