Personal finance: In the end, staying outside the single European currency may not be an option

DECEMBER IS a strange month in the City. Traders are more concerned with Christmas parties than stock positions, while investment managers take the opportunity to carry out some year-end window dressing.

Given that most institutional funds enjoy a positive cashflow, this usually involves committing uninvested cash to stocks - hence December generally means a positive performance in stock market terms. The Santa effect is just weight of money - goodwill does not even feature.

Some years have been quite remarkably active for what is otherwise a holiday period. In 1969, the Australian mining market received a fillip from speculation over potential winners in the platinum stakes. Two stocks actively traded on Christmas Eve reached heights not subsequently regained, causing a few lost fortunes. So intense was the trading that I was late for my celebratory Christmas lunch.

1998 has been much quieter. Part of the reason is the euro - due in just a week's time. Trading in European issues - both bond and equity - had pretty much evaporated mid-December. It seems no one wished to get caught out by settlement problems once the new currency was in place.

The euro effect is unquantifiable. Business and commerce well know that the relationship between the dollar and the euro will be all important in the new year. Make no mistake, the euro will be an important currency. Europe is arguably the biggest trading bloc in the world, with considerable ground to make up as it chases its transatlantic rival.

This makes the assumption, of course, that you treat the EU - or that part of it embracing the euro - as a single trading nation. While not strictly true, there is little doubt that many analysts are taking this view. If this is the right way to look at Europe, then we can expect dramatic changes in the years to come.

For example, 25 per cent of Americans own mobile phones, compared with 13 per cent of Germans and around 15 per cent in France. Sweden has a massive 37 per cent penetration of its population.

The difference in PC penetration is even greater. There are 35 PCs for every 100 people in the US, while the German figure is less than half and the French lower still. The Italians, who have a high level of interest in communication technology, strangely barely feature.

The same is true of the stockmarket. Britain has the most developed equity market in Europe but will not be in the euro. The amount of progress that could be made in the rest of euroland is staggering.

Of one thing you can be sure; this time next year it will all look very different. If the euro works - not guaranteed - expect UK companies to start listing shares in euros and sterling. A successful introduction of the currency will also inevitably hasten the merger of European stock exchanges. In the end, staying outside the single European currency may not be an option.

Brian Tora is chairman of the Greig Middleton investment strategy committee