Sky News business editor Michael Wilson

We are in bear territory, no doubt, according to one of the city’s most respected observers. Veteran market watcher Brian Marber told me this morning that it’s a time when ‘all news is bad news, with market heading down on a second leg’. If it gets sufficiently low, he thinks, there may be a post Easter rally, but he’s not optimistic.

It didn’t need the demise of the Wall Street’s fifth largest investment bank to set the mood. What’s serious about the Bear, though, is that it had good debt alongside bad sub-prime borrowing, but the bad stuff was infectious enough to rattle some of its bigger investors and that was that.

The lingering poison of the sub-prime market is more powerful than people had thought, and is clearly deeper in the financial system.

So the banks will continue to unwind their borrowing positions. The effect of that will be to make our existing borrowing, good or bad, much more expensive, and our investments, in the form of, for example our pension funds, worth less.

Couple that with a perceived recession in the largest economy in the world, and you can see why everyone’s so glum.

Even the energetic action by the world’s central banks – notably the £200bn worth of help which the US central bank made available in the last fortnight, and today’s £5bn from the Bank of England – is having very little effect.

Even worse is the ever-weakening dollar,which some think will stoke inflation in the U.S. at the same time as interest rates are being cut. That’s not a good combination.

It all puts the comments from our own Chancellorin the Budget last week that ‘Britain is better placed than any other economy to face the slowdown in the world economy,’ into the category of ‘hopeful’. Or perhaps it might be worth a prayer or two.

Once the world’s big players start to change their game, we are all spectators, and I suspect we aren’t even at half time yet.

Comments

[Dennis, Cramlington Northumberland 18 Mar 2008 13:27:59]

Now Michael, Michael
You really can't have it both ways.

It is just not on

You & Sky have heavily and often castigated the Management of Northern Rock (you know - that 'little retail bank' as you said a minute ago on Sky) for the difficulties they found themselves in when banks stopped lending to each other..

Now, when Kaye asks you the direct question about Bear Stearns, "was it bad management?", you hum and ha and then say they "were a casualty"

Hare & Hounds and that, sorry.

2000 job cuts announced toady (and that is just the start) at N Rock, a good concern humiliated by loose talk and media frenzy. There's a real casualty.

[Dennis, Cramlington Northumberland 18 Mar 2008 10:43:21]

There is a press conference in London tomorrow afternoon to announce details of the legal action and campaign for fair recompense to N Rock shareholders.

The long term and pensioner shareholders, in particular (who had their shares - in what was after all a solvent and highly successful and profitable company until the BoE and the Media put the boot in - stolen from them, against their will, in a coup by Dick Turpin & Co) will be trying to get just 'fair' treatment from this Government - unlikely I know, but deserved none the less (as I presume was the case with Railtrack shareholders and the others mentioned hereabouts).

At stake is not only the ever reducing credibility of these politicians, all politicians even, but the confidence of any 'small time' investor ever getting involved again, in a stock market beset by corrupt players, advisers, and dubious shareholder rights, controls and treatment generally.

Not at all good for the country, any of these unfortunate happenings and dodgy dealings by the red-braces mob; let us just hope therefore that some fairness is won for the small ordinary person in the courts in Europe in this case.

But, I doubt it.

Michael has already said that he feel that the action will fail.

[Robert, Scotland 18 Mar 2008 09:12:22]

This Government is now hostage to a group of people they have long treated with contempt, the Investors.
Think of the two-fingered salute they have given to those daft enough to invest in the following;
Private pensions, their reward on the advice of Ed (so what)Balls was a £5 billion annual tax take from their pension funds the minute New Labour came to power.
Railtrack Investors their fate for investing in a very important infra-structure was to be relieved of their monies with no proposed compensation.
The latest victims of New Labour's contempt for the Investor is those who were foolish enough to invest in Northern Rock.
So, if this group of people now decides they have had enough, how do the New Labour Dinosaurs (like Dennis Skinner) save the economy.

[Khalid 17 Mar 2008 16:07:47]

Sir
Naturally jitters surrounding many a financial pension either side of the pond will provide many a state of concern as well as joy to those that aren't bothered in the slightest.
Bear Sterns' latest emergence within the bear campus further as you rightly suggest, re-affirms the notion that the UK is best placed to ride the tide, no matter what [Chic] is turned.
Having said that when were pensions worth anything, whether the times be described as [Good Times] or Bad times. So, forget about half time, we havent even kicked off yet! Boy am I looking forward to the outcome of this one!!!!!!!!!!

[Matt from Lincoln 17 Mar 2008 16:02:18]

BOE must now look to agressively reduce base rate during Quarter 2, with the intention of stimulating the UK economy. Putting worries regarding inflation on hold