It’s not always an exact science to try to second guess the Bank of England’s Monetary Policy Committee decisions. But on this occasion, as Cityblogger’s contacts had predicted, the MPC left rates on hold yesterday at 5 per cent, despite some last minute rumours that it could cut them by a quarter of a per cent.

So, sadly Cityblogger’s ‘gift’ to the MPC of used fivers didn’t pay off. But let’s not be too despondent. After all, Edward Menashy, chief economist at broker Charles Stanley, reckons investors should actually take heart from the MPC’s lack of action because he thinks it means the UK economy is not in such a “parlous condition” that it requires “back to back” rate cuts. “The bears of the economy believe that the UK is heading into recession and that base rates are heading to 3.5 per cent by the end of 2008,” he says. “Recent Bank of England statements have been positive regarding both the UK economy overcoming the worst of the credit crunch and the state of the housing market. This view goes a long way to suggest that despite enduring sweat, blood, toil and tears to secure a livelihood, the UK can emerge out of the morass without sustaining a recession.”

Comforting words! Meanwhile, although the FTSE100 has dipped around one per cent this morning following a weak performance from the banks due to continued worries about the mortgage market, on the bright side the index remains comfortably above the 6,000 level at 6215 this morning. For now at least!

Cityblogger wishes you a good weekend.

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All eyes are on the Bank of England’s Monetary Policy Committee this afternoon to see if its boffins will deign once again to get out their big scissors and cut interest rates to prop up the economy. But Cityblogger isn’t holding out much hope that he’ll see a drop in his mortgage payments, despite the fistful of used fivers he sent to the Old Lady of Threadneedle Street yesterday, strapped to Tiddles with a begging note….Er…only kidding! There are, of course, few spare used fivers in the Cityblogger household anyway…!

The widely held feeling in the City is very much that the MPC will keep rates on hold, with possibly a cut expected next month. Although some weak economic data out this week led to some traders holding out faint hope for a quarter per cent cut in the base rate. “The consensus is that interest rates are not moving,” Howard Wheeldon, senior strategist at BGC Partners, told Cityblogger this morning. “[Although] there was a bit of a wobble yesterday with the Pound that suggested more bad economic news [might lead to a cut]. I’d probably be very surprised if we don’t see a 25 per cent cut next month, however. There’ll be another month of economic data and 90 per cent is likely to be bad, so there’ll be pressure on the bank to react.”

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The sun may be shining as though the height of summer is upon us – Cityblogger already boasts some colour on his usually pasty-looking limbs - but in some City hearts it might as well be snowing. With the pleasant May bank holiday already a distant memory, UBS has set about once more with its axe. The Swiss banking giant says it is to trim another 2,600 jobs by next year due to heavy losses sustained in the US subprime mortgage debacle. The bank made a $11bn loss in the first quarter and has been one of the biggest casualties of subprime, swallowing write-downs of $19bn and planning to shed a total of around 5,500 jobs. Merrill Lynch and Citigroup also announced major job cuts last month and no doubt this is the tip of the iceberg for City workers. The boffins at the Centre for Economic Research expect 11,000 job cuts this year and another 9,000 in 2009. Razor blades, anyone?

More gloom was forthcoming from Bovis Homes, too, as the housing market continues to deteriorate. Reservation levels at the housebuilder are down 30 per cent compared to the same period last year, and the company says half-year profits will now be significantly lower than analysts’ forecasts. However, Chris Millington, analyst at broker Numis, maintains his buy recommendation on the shares, pointing out that while Bovis is, like Persimmon, finding it tough out there, it still has strong operating margins and low debt levels compared to some of its peers.

Meanwhile, over the weekend Microsoft dramatically pulled out of takeover talks with Yahoo and is now thought to be cosying up to AOL already. How heartless! Some Yahoo shareholders are said to be unimpressed by chief executive Jerry Yang’s failure to cement a deal with Microsoft, with some commentators wondering if Microsoft’s action is deliberately designed to galvanise shareholders into action to rekindle the deal. “Yahoo!’s shareholders will be furious, forcing Jerry Yang’s team to think again, or return $4 billion to shareholders,” says one. Yahoo shares fell 15 per cent on Monday.

On the bright side, after faltering initially, the FTSE is up almost 2 per cent ahead of lunchtime, with oil stocks boosted by record crude prices and news that Tullow has stuck oil in Ghana.

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As Cityblogger’s thoughts turn to pretty maidens, grown men dancing with sticks and other peculiarly English eccentricities ahead of the May bank holiday, poor Mr Brown no doubt wallows in abject misery at the mauling he took at the polls last night. But perhaps he can take comfort from the fact the FTSE100 is steaming ahead, up 43 points to 6130, following a lacklustre day yesterday. The index has received a shot in the arm from talk of possible consolidation in the mining and insurance sectors.

Meanwhile, all eyes will be on the US non-farm payroll numbers out today which some economists believe will show that another 80,000 American jobs were lost in April, as in March. But Anthony Grech, market analyst at IG Index, reckons that it will take a particularly lousy showing to hurt equity markets.

“Investors have developed something of a tougher skin for less than positive news over the past few weeks, so it would probably take a reading quite a way below expectations to have any significant negative impact on the markets,” he says. “There is a feeling that stock markets at least may well have already priced in further economic slowdown in the US, limiting any real downside in the short-term.”

However, Mr Grech adds that it’s difficult to see where the catalyst for big market gains will come from and he expects markets to remain range-bound for now.

Perhaps another interest rate cut from the Bank of England’s monetary policy committee, which meets next week, could help matters? Cityblogger will have to see. But in the meantime, enjoy the May bank holiday.

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Cityblogger’s poor head is still spinning from the merry-go-round that is the FTSE100 this week. In his ignorance he dared to hope for a second that the worst of the credit crunch was over yesterday morning as the index steamed ahead, gaining 39 points to reach a stunning 6,130. Shell and BP’s stellar first quarter results boosted the FTSE100, at least for the early part of the day, with shares in both companies up strongly yesterday.

But it was not to be. By the afternoon the index had begun to shed its gains, and finished up largely unchanged on the day. Banks and mining shares were hit, with HBOS shares down 2 per cent after it unveiled its £4bn rights issue, the worst kept secret in the City after it was widely leaked on Monday. The 2 for 5 issue went down as something of a damp squib, and HBOS shares are down a further 3.5 per cent this morning. Analysts have criticised the cut in the dividend, with some suggesting investors give the shares a wide berth. “We do not believe HBOS has adequately explained its rationale for raising £4bn of equity from its shareholders,” says Tom Rayner, analyst at Citigroup, who maintains a sell recommendation on the shares. “[And] we believe HBOS will be vulnerable to further evidence of property market weakness.” Investors are waited with baited breath to see which bank will be next with its cap in hand to shareholders.

And there’s little cheer about in the markets today. The FTSE100 is down just under half a per cent to 6054 – mercifully still above 6,000 - with mining companies on the run following a lacklustre production update from Kazakhmys and profit taking by investors. Oil and gas giant BG is one of the biggest fallers, with its shares down 5 per cent this morning following its unsolicited swoop for Origin, which values Australia’s utility company at $12bn.

And there is more doom and gloom on the house price front. According to a survey by Nationwide, house prices have suffered their first annual fall in 12 years and are down for the sixth consecutive month (April).

Pass the razor blades! On the bright side there's speculation the Bank of England could cut interest rates again soon.

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More rights issues from the banks appear to be on the horizon, just as was predicted here on this blog only last week. And it doesn’t appear that investors will have to wait long for them. Doing the rounds on the rumour mill today is that HBOS could be only a day away from announcing a £4bn rights issue at its annual shareholders’ meeting tomorrow. The bank and mortgage lender’s finance director Mike Ellis has already told shareholders the outlook for the housing market looks grim. He also recently suggested banks could face further write-downs due to difficulties in the financial markets. And analysts are predicting that given the £6m asset write-downs taken by the Royal Bank of Scotland, which announced its own rights issue last week, HBOS could face similar issues, despite relatively modest write-downs taken by the bank up to now.

But David Buik at Cantor Index reckons HBOS would do better to hold their fire. “Andy Hornby, the CEO, would do well to wait until July or August,” he says.  “The market is just digesting the RBS £12 billion rights issue and who knows Alliance & Leicester may be waiting in the wing to do the same... If HBOS wants to get its Tier One capital ratio up from 5.7% to 6%, perhaps a rights issue in the late summer would be advisable, but £4 billion may not be enough.”

Meanwhile, Mike Trippitt, banking analyst at Oriel Securities, rates the shares as a hold, warning that HBOS’ mortgage business will be under “some pressure” in 2008, while its corporate side will likely see “slow growth”.

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It’s hard to remember it now, but time was that the banking sector was as safe as houses. Now the whole industry feels swathed in sand and fog. And there’s been little letup this week - today was another tough day for banking stocks, helping send the FTSE100 down over 100 points and back below the crucial 6,000 mark.

Credit Suisse kicked off the party by unveiling a SFr 5.3bn ($5.2bn) write-down on the back of leveraged finance losses. The Swiss might be known for their financial acumen, and certainly investors had thought the bank would emerge relatively unscathed from the credit crunch, but it appears they thought wrong. Credit Suisse made a $2.1bn loss in the first quarter with net revenues down a shocking 72 per cent. At least its chief executive Brady Dougan – an American – had the good grace to label the results “clearly unsatisfactory”!

And Cityblogger has watched the day progress further into the dog house. Royal Bank of Scotland already has egg on its face from the recent rights issue announcement, (particularly given that the need for it is partly due to its acquisition of ABN Amro debacle) but now Barclays has stepped up to the plate. Although it isn’t – yet – unveiled its own rights issue, the bank says first quarter profits will be down on last year’s due to disappointing trading at Barclays Capital and Barclays Global Investors.

Drug giant AstraZeneca failed to inject any health into the markets either, with shares down 3 per cent following disappointing results. And Persimmon put the icing on the cake by announcing that it is to stop building new homes altogether due to higher cancellation rates and falling sales. The decision by mortgage lenders to tighten lending criteria and withdraw certain products from the market has put the squeeze on the house builder. The shares fell 8 per cent this morning and sent panic through the equities markets of further house price doom and gloom.

“It’s really strange, but the FTSE100 has spent a lot of energy going nowhere,” David Jones, chief market strategist at IG Index told Cityblogger. “There’s been quite a lot of bad news today and there’s no good news [on the horizon]. We all know this but the market seems to forget. It’s schizophrenic. Unfortunately I can’t see things getting any better in the near term. We’ve had RBS’ rights issue and there’s a feeling that it could start a bit of a trickle from the other banks.”

Tin hat, anyone?

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To the untrained eye, Cityblogger could appreciate how the City with its dusty old institutions might appear a dull sort of place inhabited by fat men in suits. But nothing could be further from the truth – well, with the exception of the rotund gentlemen, such as er…Cityblogger himself. Not a day goes by that the newspapers don’t feature a doom and gloom piece on the credit crunch. Perhaps the last time the City featured so heavily in the headlines was Black Monday.

And, luckily for these poor hacks, the credit crisis continues apace. Yesterday the Bank of England launched its latest attempt to patch up the gaping hole in banks’ finances and encourage them to lend to each other by allowing them to swap mortgage debt for government bonds, a scheme it says is worth £50bn.

But some commentators say the scheme is too costly for banks and doesn’t go far enough in preventing certain banks from ‘hoarding’ their cash and refusing to lend to others. “It seems that the initial reaction from financial markets and those that the scheme is designed to assist appeared somewhat diffident on the basis of cost in relation to risk,” explains Howard Wheeldon, senior strategist at BGC Partners. “That suggests to me that only the weakest banks may initially take up what is on offer from the Bank of England and that larger banks may stand aside for a while.”

Certainly the equity markets’ reaction was mute yesterday and the interbank lending rate LIBOR has, as yet, failed to drop significantly. What’s more, Mr Wheeldon believes further rights issues will be on the cards as banks bow to shareholder pressure to strengthen their balance sheets.

And another credit crunch victim - Royal Bank of Scotland - finally launched its much-rumoured £12bn rights issue today. The 11 shares for 18 rights issue at 200p will help cover a potential £5.9bn asset write-down. But the bank admits the timing of the takeover of ABN Amro’s wholesale business didn’t help. Previously highly respected chief executive Fred Goodwin, the sort of chap who appears in the top five of best CEO lists, admits that extending the bank’s exposure to the wholesale money markets last year was, in hindsight, not ideal.

Be assured, this probably won’t be the last banking rights issue this year.

Meanwhile Nomura is reportedly investigating an employee for suspected insider trading…On the bright side the FTSE100, while down slightly, remains past the 6,000 mark.

The City? Dull? I think not!

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They may have made a small fortune from Cityblogger, flogging him a new build toy house with walls composed of papièr maché and barely room to swing a hamster, let alone Tiddles, but he can’t help but feel a pang of sympathy for construction companies today. Or at the least their long-suffering shareholders. If life wasn’t difficult enough for these blighters, many of whom have seen their shares drop like a bag of bricks over the past year, the Office of Fair Trading is girding its loins to go after them.

112 building companies including Balfour Beatty, Carillion, Crest Nicholson, Galliford Try and ROK, are accused of price fixing. The racket apparently involves companies deciding amongst themselves who will win a particular local authority bid by one company bidding at a high price, but the other companies coming in much higher, ensuring the first company wins. The OFT claims one local authority paid £500,000 over the odds for a new primary school because of so-called ‘cover pricing’. The winning companies also allegedly paid ‘compensation’ to the losers. A number of firms have already squealed to the OFT and been granted leniency.

OFT investigations, while no doubt crucial, are the bane of investors’ lives. They can drag on for years and all the while hanging over companies like a black cloud, holding back share price growth. Even if the OFT ultimately decides that competition rules were not broken! Past investigations have included the dairy industry – which hit shares in Robert Wiseman – and the veterinary drug industry – affecting Dechra Pharmaceuticals. Both companies were cleared of wrong-doing, although Robert Wiseman, along with a handful of supermarkets, is currently under investigation again.

So investors will no doubt be beating their breasts. Tom Gidley-Kitchin, construction analyst at Charles Stanley, told Cityblogger he was taken aback by the extent of the price-fixing. “Call me naïve but I’m slightly shocked,” he admits. “I expected there was a certain amount of agreement [between companies] that clearly wasn’t acceptable. But the idea that firms were paying compensation to stay away from the bidding. I’m surprised. I hope there will be a clearing of the desks now.”

However, analysts at Numis Securities are more sanguine. Analyst Howard Seymour believes that because it will be companies’ regional divisions that are hit, fines are likely to be no more than £2-3m, rather than the tens of millions some press stories predict.

And Mr Gidley-Kitchin remains positive on the construction sector, despite problems in the house-building market. “There’s still huge demand for infrastructure, whatever happens in house building,” he says. He favours Balfour Beatty and Carillion because of their lower house-building exposure and exposure to PPP and international growth sectors.

And, on the bright side, the FTSE100 has made it through the 6,000 barrier once again this morning. Phew!

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The sun is shining, the sky is blue and, if Cityblogger ignores the airborne piglets flapping their way past his home office window, he could (almost) believe he is in the midst of a bull market. Tiddles is sunning his somewhat rotund belly on the shed roof without a care in the world. Well, true, nothing new there...

After a dismal day yesterday, the FTSE 100 is up just under one per cent, breaking through its five-session losing streak, oil prices have hit another high and, Tesco’s jolly full year results would have us believe that the retail sector is bouncing with health! The retail monster says underlying profits before tax were up 11.8 per cent last year to £2.8bn and that all important like-for-like sales (excluding petrol) rose 4 per cent in the first five weeks of the new financial year. As Nick Coulter, analyst at Numis Securities, quipped in his note to investors this morning, “some crisis!”

And yet sales figures from the British Retail Consortium paint a very different picture. The BRC says like-for-like retail sales fell in March for the first time since July 2005, dropping 1.6 per cent. Clothing and footwear sales were the worst for eight years but that food sales also fell. Comparisons with last year were made difficult because of the unseasonal cold weather and the change in school holidays, but worryingly the BRC warns that “consumer confidence has fallen to new lows” with shoppers unwilling to hand over cash for major ‘big ticket’ items. Sports retailer John David Group also reported healthy full year results today, but complained in its outlook statement that current trading conditions are tough.

But Tesco’s continued strong performance shouldn’t surprise anyone. The retailer is precisely the kind of place the stricken shopper, battered by rising energy costs, is likely to head in an economic slowdown. Similarly, the US discount retailer Walmart is also doing well right now and propping up America’s retail sales.

Meanwhile, Gordon Brown is meeting the heads of major banks and mortgage lenders to discuss what can be done to tackle the credit crunch. Let’s hope they can come up with something more substantial than the occasional cash injection into the money markets, and he can persuade them to start lending to each other again!

But hold onto your hats. With big US corporates set to report results this week, including Johnson & Johnson, JP Morgan and Capital One, City insiders expect more bad news to come – following US bank Wachovia’s losses yesterday. Oh joy!

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From the dull performance of the FTSE 100 yesterday, Cityblogger would have thought the Bank of England hadn't cut interest rates at all! Never was a rate cut greeted with such a lack of enthusiasm! The equity markets were muted as most investors had expected the 25 basis point cut to 5 per cent, although some had dared to dream of more. On the plus side, it looks increasingly likely that another one could soon be in the offing.

Grim news today from the High Street, though. Sir Philip Green's privately owned BHS says profits will fall this year, blaming clothing price inflation in China. And DSG, owner of Curry's and Dixons, has issued another profits warning, complaining of poor computer sales and customers being unwilling to pay top dollar for electronic goods. At least the bid interest for British Energy has provided some cheer and the FTSE 100 is up this morning just under 1 per cent to 5999. Will we see it push back through 6,000 and hold onto any gains, Cityblogger wonders?  Fingers crossed.

Have a good weekend.

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The City is chewing on its collective knuckles to see if the Bank of England’s monetary policy committee will trim interest rates once again on Thursday.

Traders are largely pricing in a 25 basis point cut, so if it doesn’t go their way it’s likely it could all end in tears, with the equity markets reacting unfavourably. But those in the know say a cut is very likely. “I do think we’re going to see a token 25 basis point cut because that’s what the markets are screaming for,” Tom Hougaard, chief market strategist at City Index, told Cityblogger this morning. “We’re all such cry babies these days. Nobody thinks about inflation and the minute somebody feels the pinch and there’s any fear of voter migration [interest rates are cut]. It’s so bloody political.”

A handful of blue chips stocks have also gone ex-dividend today, which has put some downward pressure on the FTSE100. Investors remain jittery too about banks and mortgage lenders after the worrying house price survey yesterday from Halifax. Cheeky HSBC, which doesn’t borrow from the money markets, is trying to make a buck from its rivals’ woes. It’s offering to match borrower’s existing fixed-rate mortgages. The rub is that customers have to have 20 per cent of the equity in their house. Mmm…

What’s more, the International Monetary Fund decided it would cheer us all up by estimating the credit crunch could cost the financial sector $1,000 billion. The good news, it says, is that the banks have probably already taken the worst of the write-downs necessary, but pension funds, insurance companies and hedge funds could be in for further difficulties and liquidity will remain an issue. And according to a leaked report published in the Daily Telegraph, it’s also cut growth forecasts for the UK for this year to 1.6 per cent, slating the same for 2009, and is increasingly concerned about the stability of house prices in the UK and the possible effect on the economy if they fall. Alistair Darling said the IMF’s findings were “not surprising”, but City pundits are unimpressed by the government’s handling of the economy. “Cobblers!” Said one of Mr Darling’s so-called prudence.

Worryingly Mr Hougaard thinks that while the media is hyping up the credit crisis to nightmarish proportions, guaranteed to frighten the wits out of the non-investment savvy man in the street, there is still worse to come. “I’ve studied the stock market for 10 years and I just don’t think the economy is ugly enough yet,” he says. “If I were an investor I’d get out of the markets now.”

Oh dear...

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Cityblogger has returned from his surprisingly sunny Norfolk retreat to further economic doom and gloom, it seems. After a delightful week’s crabbing by the bracing North Sea, he had dreamt of stretching his mortgage to encompass a modest holiday villa. But alas this was merely a sand castle in the air. Certainly if Halifax’s house price survey today is anything to go by.

The mortgage lender’s report has little in it of good cheer for homeowners. House price growth last month was the lowest for over a decade, with prices down 2.5 per cent on average. And even worse, Halifax now says prices will fall this year instead of its previous expectations that they would be flat.

But first time buyers won’t be rubbing their hands together in glee, either. Abbey has become the latest to ditch its 100 per cent no deposit mortgages, following in the footsteps of other lenders, including Halifax, Alliance & Leicester and Nationwide.

So after a strong rally last week, the FTSE100 fell this morning almost 1 per cent to 5970, with banks and house builders’ shares taking the brunt once again.

Investors had been hoping that the worst of the banking crisis had abated, but many City commentators believe this is far from the case. “The liquidity problem in the UK remains very acute,” argues David Buik at Cantor Index.  “The credit crisis itself has only just started to bite.  The cost of mortgages in the UK has increased [while] the availability of money for mortgages and loans has consequently decreased.”

Meanwhile traders are hoping the Monetary Policy Committee will see fit to trim interest rates again this week to inject some confidence.

Elsewhere, there is speculation that the Qatar Investment Authority may up its stake in Sainbury’s, while the burgeoning love affair between Yahoo and Microsoft has turned somewhat sour, with the two love birds busy scribbling rather public poison pen letters to each other and Microsoft threatening a hostile takeover.

Not exactly love’s young dream!

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What a strange few days. The Financial Services Authority has been busy undergoing a period of self-flagellation, admitting a catalogue of errors over the Northern Rock fiasco – Cityblogger half expected the gentlemen in question to stand outside the Bank of England whipping themselves with chains, but perhaps his fevered imagination expects too much. And yet the FTSE100 has been relatively steady, miraculously holding onto its gains. This morning the index stood at a healthy 5722, up 62 points. Even the London Stock Exchange bravely told the markets today that’s optimistic in its outlook for the year!

True, yesterday was a fairly quiet day for equities and there was a fairly weak response from the markets to Mervyn King’s appearance before the Treasury Select Committee. But at least it's raised hopes of more interest rate cuts to come.

So what can we expect from the equity markets in the next few weeks? Tom Hougaard at City Index reckons we’re undergoing a period of consolidation in equities as investors wait to see what happens, and we’ll see further volatility going forward with a “buying surge” at the end of the week.

But Anthony Grech at IG Index takes a more bearish view. “There is still a sense out there that the sort of short, sharp rallies we have seen over the last couple of days are nothing more than a quick respite before the market turns lower again,” he points out. “There are still no immediate signs of a turnaround in the areas the market has worried about recently - be it inflation, banking or housing - so many traders are probably still all too keen to hit the sell button after a couple of days of good gains.”

What’s more, Mark Dampier at Hargreaves Lansdown is also cautious. “Nobody’s got a bloody clue [where the markets are going],” he told Cityblogger. “You get a hangover after a party and we’ve had a 10 year party [in the equity markets]. But we’ve got a full scale banking crisis and that’s not going to go away. Valuations in corporate bonds look good [right now] and in due course equities will too. But could the FTSE fall another 10 per cent? Absolutely.”

Mr Dampier warns that house prices will fall significantly due to the tighter lending criteria brought in by mortgage lenders, making it more difficult for house buyers to borrow more money and therefore forcing sellers to lower house prices if they want to sell.

Meanwhile, DIY specialist Kingfisher is still under the cosh, with trading deteriorating in the last two quarters, no profit at B&Q in the fourth quarter and is today slicing its dividend in half. Ouch. Cityblogger is heading to his nearest outlet in search of some bargains.

Where do you think the markets will finish up this year?

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This time last week, in the depths of Bear Stearns despair, who would have thought the Easter holidays could inject such cheer into the equity markets? The FTSE100 is up nearly 4 per cent this lunchtime to 5694. Incredible! Cityblogger had to make himself a stiff cup of Earl Grey to ease the shock of it all, and ensure that it wasn’t just the fumes from his furniture cleaner playing with his cognitive function. In fact, city watchers are scratching their heads, wondering what exactly was in all those Easter eggs traders gorged themselves on over the festive break.

Revelations that JP Morgan is raising its bid for Bear Stearns five-fold to $10 a share or $1bn have certainly helped improve investors’ humour, as well as more encouraging US economic data. Housing sales in the US have picked up, suggesting the housing slump there may be nearing an end. Banking and building stocks have responded positively, and the markets are, for once, a reassuring sea of blue.

But while we are experiencing something of a relief rally, city veterans don’t believe we’re out of the woods yet and are cautious of some of the Sunday press articles this weekend suggesting now is an ideal time to buy shares. “While we welcome this rally and believe that it really is fully justified - particularly in the greater degree of US economic optimism - we are mindful that as far as the UK is concerned it's [really] a necessary pause,” explains Howard Wheeldon, senior strategist at BGC Partners. “We do believe, along with many others, that the worst is now past. But until banks have cleared the decks, until there is reasonable enough proof that the US housing market has turned and that the current US recession will be short-lived we cannot envisage sustainable upward momentum in the markets.”

Sobering thoughts!

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Yesterday was yet another whirlwind day in the banking sector, with HBOS shares slumping 17 per cent on wild rumours that the bank was seeking emergency funding. Other banking shares, including Alliance and Leicester, also slipped in sympathy.

City pundits expressed disbelief at the stories, considering HBOS’ long-held reputation for conservatism. “What is unforgiveable is to perpetrate rumours about a pillar of financial society without foundation,” complains David Buik at Cantor Index. “This bank is about as conservative as it comes and does not compete aggressively for market share.”

And now it seems the Financial Services Authority has seen fit to comment on the market speculation – something it NEVER does – insisting that it’s all a lot of damaging rubbish and no meetings have been held with any institutions for emergency funding. The regulator plans to hunt down the ‘vagabond’ traders trying to make a fast buck on false rumours. Frankly this, coupled with the big US interest rate cut which has sparked hopes of further UK rate cuts, ought to sooth us a little, but instead the FTSE100 has opened down this morning, with a profits warning from Credit Suisse suggesting further bad news is to come from other international banks.

Meanwhile revolting Northern Rock shareholders and the UK Shareholder Association are launching a legal fighting fund to challenge the government’s nationalisation and puny compensation for shareholders who lost out. For more information contact 0870 70 60 600 or uksa@uksa.org.uk

Cityblogger plans to drown his sorrows by spending quality time with his rather satisfyingly rotund Easter egg, and wishes a very pleasant Easter to you all.

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No prizes for guessing that far from JP Morgan’s takeover of Bear Stearns serving to calm the market, investors are now trading rumours about which US bank could be the next to fail. The name on their lips is Lehman Brothers which is due to report results on Tuesday. Such is the fear in the markets that shares in the bank are already down a painful 22 per cent this afternoon merely on idle speculation.

Lehman’s insisted this morning that it has no liquidity problems. But then these were the famous last words of Bear Stearns too. As Mark Dampier at Hargreaves Lansdown told Cityblogger this morning: “You can’t even believe what a CEO says right now. And the lot you really don’t want to listen to is the politicians. If they say it’s not that bad – as Alistair Darling did in the Budget - then you really should worry."

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In the run-up to major festivals the markets usually fall eerily quiet, as investors are more concerned with lazing around the French Riviera quaffing a nice merlot than the latest movements in equities. Cityblogger usually spends it hopelessly reminiscing about the lovely little villa he used to enjoy in La Rochelle before his ex-wife walked off with it, and everything else but the kitchen sink – tell a lie, she took that too - when they parted ways. Nowadays he and Tiddles usually tell friends they’re going skiing in Val d’Isère for the week, but head to Great Yarmouth instead.

But it’s a different story this week as Easter approaches. Chocolate eggs and cute bunnies are the last thing on investors’ minds. Instead, all hell seems to have broken loose in the markets following the collapse of Bear Stearns’ on Friday. The FTSE100 began the run-up to Easter by slumping over 2 per cent this morning to 5482. Not a good start to the week. What seems to have spooked the markets, and slammed banking stocks once again, is news of JP Morgan’s bargain basement deal to buy Bear Stearns. The US bank was forced to reach out for emergency funding last week following liquidity problems and is believed to be exposed to the collapsed Carlyle Capital hedge fund.

JP Morgan has snapped up the Bear for the princely sum of $2 a share, or $236m, a price which would have been unthinkable just a few weeks ago. "Last year JP Morgan paid a dividend of $1.40 a share!" points out Mark Dampier at Hargreaves Lansdown. Over the past 12 months Bear's shares have traded at between $30 and $158.

Recent dollar falls, a drop in US consumer confidence and in addition to that, the first fall in US retail activity for 16 years also haven’t exactly promoted stability in international equity markets. But with Bear Stearns’ takeover, is the banking crisis over or is Bear simply the tip of the iceberg? Mike Trippitt, banking analyst at Oriel Securities, reckons investors need at least a full quarter’s worth of results from US banks to “gauge the situation”, but ideally two quarters. Other US banks including Lehmans and Goldman Sachs begin reporting this week, so we should soon get some sort of picture. However, Mark Dampier reckons we're not out of the banking crisis woods yet. "There's a lot more to go yet," he warns. But if you’re brave enough to get back into the banking sector, in terms of UK banking investments Mr Trippitt favours HSBC, Standard Chartered and Lloyds TSB.

At least British Energy is providing some light relief with a possible takeover in the offing. In the meantime, try and have a happy St. Patrick’s Day if you can!  Cityblogger will be consoling himself later with a pint of the black stuff.

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If you go down to the woods today you certainly won’t find anyone employed by Bear Stearns, furry or otherwise, supping on lemonade or chowing down on fairy cakes.

Shares in the US bank have plunged by a shocking 50 per cent after the company effectively did a Northern Rock stateside. Bear has had to reach out to JP Morgan and the Federal Reserve Bank of New York for an emergency bail-out due to problems with liquidity.

Cityblogger suddenly has a strange feeling of déjà vu…

Rumours have been circulating this week that the bank could be in difficulties, but management previously denied there were any issues with liquidity. Investors are concerned about Bear’s possible exposure to Carlyle Capital, a hedge fund which  collapsed this week and is part of private equity outfit Carlyle.

Unfortunately the London market is also suffering the subsequent hangover. The FTSE100 dipped by 1 per cent this afternoon following Wall Street’s lead to 5,644 after another miserable trading day yesterday.

“The market was right to be hugely suspicious of Carlyle,” said one commentator who asked not to be named. “And a 50 per cent drop in Bear’s share price is telling you something. They’re supposed to be moving into plush new offices in Canary Wharf – I wonder if that will happen now.”

Cityblogger hears there may be some more affordable premises going in Newcastle…

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