Zero In

Let's zero in on the main market news that may have flown under your radar.

High end London sales have fallen by twenty percent. These are primary luxury homes in the prime area of London, valued between £1m ($1,606,640) and £2m ($3,213,280) compared with the past six month period. What is causing the drop in sales?

Estate agents believe that buyers are being deterred by the talk of a Mansion Tax and pending general elections scheduled for May 7, 2015.

Recent data from the high end estate agent, Strutt & Parker, indicated that the number of sales in the £2m to £5m bracket, which would exceed the £2m Mansion Tax threshold, fell by 27% for the third quarter of this year compared with July to September in 2013.

Perhaps we may see a sharp market correction in high end real estate soon.

At the most exclusive end, properties worth 5 million pounds sterling and over in the prime central parts of London, defined as Knightsbridge, Belgravia, Chelsea, South Kensington, Fulham, West Chelsea, Kensington and Notting Hill, according to real estate agents have performed better, albeit slightly with declines of 15.2 percent. What this might mean is that at this ultra high end of the market, prices are relatively inelastic. In other words, super high net-worth individuals, are not deterred by paying a few hundred thousand pounds in taxes, which probably amounts to small change for these high-rollers.

“Whilst total values transacted in central London are markedly down on this time last year, we must have a sense of perspective and accept that 2013 was an exceptional year. It is really not surprising that prices are stabilising after the dramatic price increases we saw over the past 12 months," said Stephanie McMahon, head of research at Strutt & Parker.

“Sales volumes are also showing a slowdown and two quarters of data do suggest a trend of decline...We have seen these conditions before in the run up to a general election when speculation mounts."

The UK shadow chancellor Ed Balls shed more light on the mansion tax proposal this week.

The shadow chancellor said that middle-class families will be barred from deferring Labour's mansion tax if they earn more than £42,000 ($67,478). However, higher rate taxpayers who own properties worth more than £2m will have to pay the tax immediately. Only those earning less than £42,000 will be able to defer the payment until they sell the property or transfer ownership.

European bank stress tests are back on the radar again. Are European banks robust enough to cope with another financial, economic shock? Bearing in mind, for the test to have validity and give investors confidence, some banks will probably have to fail. If all the banks passed the stress test then it would lose credibility,so we are most likely going to see some banks fail the stress tests. I understand that the banks are not obliged to make their results public. But the banks that opt to do this, we can assume that they have most likely failed the test.

A media report said at least 11 banks had failed the landmark financial health checks, driving some banking shares lower. Spanish newswire Efe which said that it, along with banks from Italy, Belgium, Cyprus, Portugal and Greece, had failed the ECB review based on preliminary data, but it gave no details of the size of the capital holes at the banks.

The ECB, is scheduled to publish the results for 130 banks on Sunday and is remaining tight lipped on the results of individual banks.

"Any inferences drawn as to the final outcome of the exercise would be highly speculative until the results are final on 26 October," said an ECB spokesman.

There were no immediate comments from the other affected banks on the report, which briefly caused the euro to dip and led to European stocks reversing early gains.

"The bigger, more important question is not which banks have failed but which banks have achieved only a marginal pass," said Jeremy Batstone-Carr, head of private client research at Charles Stanley.

There was slight unease in the European markets ahead of the results with the euro dipping slightly to 1.26, European equity markets did however, recover some recent losses.

Over in the US, despite the low mortgage rates, the trend in slowing housing sales continues. Rates dropped to their lowest level in nearly 18 months last week, which did trigger an 11.6 percent rise in applications, according to the Mortgage Bankers Association. The gains however, were driven entirely by refinances, just as they have been for several weeks. November mortgage applications to purchase homes saw no boost at all from lower rates, falling 5 percent from the previous week and 9 percent from a year ago. Sales of existing homes did increase in September by just over 2 percent from August, according to the National Association of Realtors; however, they are weaker than a year ago.

China's economy has clocked its worst quarter in more than five years, raising concerns over Beijing's ability to meet its own annual growth target.

Gross domestic product expanded by 7.3% in the third quarter versus the same period last year, according to government data, the weakest performance since the global financial crisis. Nevertheless, putting this growth figure into perspective, 7.3 percent economic growth is still an impressive rate and more sustainable compared to the double digit rate at which China was growing, just a few years ago.