Financial Betting Articles

NEWS FLASH - this morning's trading saw the FTSE down below 5800, falling off a cliff in the wake of a disastrous week Stateside. We can look back with dewy eyes at the 6000 mark that everyone thought spelt such bad news. Deepening fears of a US recession rocked the Asian markets as well as they predicted export revenue to take a beating - earlier today the Hang Seng and the Nikkei both lost 3.9% of their value.

It's all in the wake of the US markets taking a pasting again last week. They are currently hanging on the ropes, hoping for the referee to step in. The big blows were Merrill Lynch's $7.8bn losses and disappointing manufacturing figures. There were also a couple of nasty jabs in the shape of Citigroup's stinging write-downs and the worst US retail results for 5 years.

The Ernst and Young Item Club believes that UK growth will halve to 1.8% in 2008. And there are other reasons to believe that the UK can weather a US storm. Sir John Gieve, the Bank of England's deputy governor, spelt out in a speech recently that there are two key factors that will influence whether the UK economy goes in to recession - credit constraints and confidence.

Gieve came over all Churchillian when he claimed that we had perhaps reached the end of the beginning of the credit squeeze. The Bank's own survey showed that there was a noticeable reduction in the credit available to firms and households in the last 3 months and this was likely to continue. The upshot might be constrained household spending, a depressed property market and lower investment by firms. The credit purse strings would tighten yet further if the wider economy slows down and bank's need to control defaults. The equity market could well slip slide down down (deeper and down).

But never fear! You see the key to economic prosperity lies in our minds. No, I'm not flogging some two-bit self-help book, I'm talking about the power of the economic game played in our heads. With high employment and inflation under control, confidence should be robust enough to see the UK economy through. And unlike the last credit squeeze of the early 90s when the Bank of England's hands were tied by the ERM, this time round they can provide regular fillips in the shape of interest rate cuts should confidence start to flag. A positive mental attitude will keep people spending, firms investing and buoy the equity markets.

And interest rate cuts could be on the cards soon with inflation under control as the CPI measure of inflation sticks at 2.1% for the third month running. The real threat on that front is from 'outside' inflationary pressure. Perversely, a US recession could be good for the UK as the world's biggest energy consumer eases up on the black stuff and (hopefully) oil prices fall. With the US economy suffering and the Fed slashing rates drastically, it should also spell good news for Sterling's value against the greenback.

It might be pie in the sky thinking but you’ve got to cling on to something in these troubled times. Have you got a better view on how oil, currencies and the world markets will play out? Why not put your view to the test at ChoiceOdds.com and see if it pays to play.

The FTSE has shed 8.59% of its value so far this year.

The DOW fell 2.46% last Thursday - the biggest percentage drop for 50 trading days.

So far this year, the DAX has lost on average 57.93 ticks each day. That adds up to 9.34% of its value lost since New Year.

Jeremy Paxman now gets through 17 pairs of socks per week.

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