Financial Betting Articles

A new month and a week that marks 6 months since the credit crisis came along and started to turn the financial world on its head. The equity markets can say good riddance to January, which saw the DOW shed 7%, the Nikkei 7.5% and the FTSE 10%. And once again, those 7 guys and 2 gals at the MPC have a serious decision to make Thursday about UK interest rates that will go a long way to shaping the next chapter of this riveting story.

A quarter of a point cut is the consensus view but there is plenty of room for surprises as we've all learnt in the last few months. What the MPC will have to consider is the factors that will bear on the future of the UK economy. Understanding these will help to form a view on which way the market jumps when the news is out noon on Thursday and explain why a cut could be both good and bad news.

The first thing to look at is the big picture. The global economy as a whole appears to be bearing up reasonably well in the credit crisis so far. The International Monetary Fund predicts that growth will be robust at 4.1% this year. This is well and truly driven by the emerging market economies who are still able to surge ahead of their sluggish developed brethren. For instance, while China's GDP was a quarter of the US's last year, the former's growth (11.4%) contributed more to world growth than the latter's (2.2%). What's more, these countries are able to further strengthen their hands by snapping up chunks of companies in developed economies at fire-sale prices, as write-downs topping £50 billion so far have left many companies' balance sheets in need of emergency resuscitation.

Unfortunately, in this game it's who you know as much as what you do that will decide your fate. The problem for the UK is that it is too chummy with the US and European economies and these are slated to see sub-2% growth this year. So while the BRIC (Brazil, Russia, India and China) countries are living it large, we're stuck staring at our toes when it comes to buying the next round at the G7 bar.

The former have-nots are having a field-day and having one over on the haves-but-not-for-longs. It's a credit squeeze like this that can have a dramatic impact on the balance of economic power for decades to come. And the Bank of England needs to negotiate this difficult period with care, for fear of being left on the bottom of the pile. If they get it wrong, the UK market will be more bummed out than an England rugby fan who's got a soft-spot for the New England Patriots.

The Bank of England would like to turn to the Government in its hour of need to ask for some loosening of fiscal policy to give the economy a fillip but with public debt sky-rocketing, it's a "Sorry, but no" from Messrs. Brown and Darling.

So we truly are squeezed between a rock and a hard place - on the one hand suffering from trade links with the losers of the world economy and on the other having to suffer the inflation brought on by demand for commodities from the winners. With the public's expectation of inflation for the next year rising to 3.3%, this and any subsequent rate cut will be an agonising decision for the MPC.

It's a crazy mixed up world where good news can be bad news - will a rate cut be the boost the economy needs or lead to run away inflation? It's also a world where there are a whole host of short term betting opportunities to turn your view in to a chance to win. Are we going to see a best of British stiff upper lip from the MPC or a knee-jerk slash? And what will the markets think of it - in 5 minutes, an hour or at the end of the day? Visit ChoiceOdds.com of course to get to the heart of the action.

January saw the FTSE fall on average 26.23 ticks each day.

The DAX had a terrible month, losing 15.1% of its value in January.

Volatility came home to roost with the DOW trading in a 420.01 tick range each day on average in January.

The pancake race dates back to 1444 when a housewife ran to church still holding her frying pan.

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