Banking outlook

The banking sector has been slow to recover from the credit crunch. Apart from the rally between the lows of March 2009 and highs of September 2009, the sector has shown little growth. And given the current level of uncertainty over the European banking sector and the likelihood of further cash calls by other European banks for funding shortfalls in 2011, the likelihood of further upward movement in bank shares looks remote in the short term.

Standard Chartered, an Asian-focused bank, has been one of the few success stories. It has not only emerged stronger from the crisis, but is also one of the few UK banks not to need any help – government or otherwise. Speculation abounded in early 2010 over a possible £50bn bid from JP Morgan and the overall trend remains one of strength, as the bank continues to make new highs. Since the March 2009 lows of 533p, the shares have more than trebled in value to near the 2,000p level.

Concerns over Spanish debt have undermined the Barclays share price, given the bank's exposure to that region. Having traded sideways since the 47p lows of March 2009 until the 400p highs in September 2009, the share price should remain fairly stable while support around 250p-255p remains intact.

For Royal Bank of Scotland and Lloyds, the increase in capital requirements by Basel 3 will limit upward movement in their share prices. Lloyds is struggling about the 79p-80p area, while RBS's exposure to the Irish banking sector is preventing progress beyond recent highs.

To mine or not to mine?

Record copper prices and optimism over 2011 growth forecasts for emerging markets is fuelling demand for copper, with highs above $4.30. Speculation over monetary tightening in early 2011 to counter rising inflation in the Bric economies (Brazil, Russia, India and China) could curtail risk-appetite as a result of a slowdown in growth. But while Bric GDP growth outstrips the west, mining companies should continue to benefit from rising commodity prices. However, any slide in copper prices could quickly undermine the mining sector, sending prices into a sharp slump.

Some stocks within the mining sector have outperformed the sector since the 2008 lows. BHP Billiton, the world's largest mining company, has managed to regain all of its losses from the 2008 decline, despite notable failures in its acquisitions programme over the past 12 months. A drop below the 2,200p level could indicate a fall, but a larger sell-off would be prompted by a move below the upward trend line at 1,925p, off the 731.50p lows of 2008.

Chilean copper miner Antofagasta outperformed all others by blasting past its 2008 highs of 886p to trade at nearly 90% above these levels.

Michael Hewson, Carel de Braal and Brenda Kelly