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market news by nicholas ford
No doubt you will have read the financial press of late. Liquidity has dried up, evidenced by the current 3 month LIBOR rate which is currently at a 9 year high of 6.9% (15:28 hrs 11.9.07) which is more than 1% over official base rates. This is affecting bond markets and will feed through to equity markets. There are countless negative rumours in the city concerning one of the major UK retail banks and in addition to this, on a global level, there is evidence that Japan and China are now net sellers of US treasuries, that with the disappearance of cheap money the M&A boom is petering out, oil prices are at a 5 week high and inflation is lop-sided and therefore badly targeted in the US and UK. The Bank of England failed to ease the pain last week by cutting rates (predictable, since "independence" 10 years ago inflation is their reference point), and economic news from the US is disappointing.
In short, at the moment I believe the potential downside risk is far and away greater to the potential upside gain.