Independent UK: Global credit turmoil piles pressure on central banks

[marmar]

Global credit turmoil piles pressure on central banks
Published: 13 August 2007


Investors around the world were this morning bracing themselves for further falls on global stock markets, as the uncertainty continued over the scale of the US sub-prime mortgage crisis and the extent to which the rest of the financial system has been caught up in the problems.

Inter-bank interest rates shot upin London on Friday evening, as they had done the previous night, prompting the following day's collapse in confidence. While the US stock market rallied in late trading on Friday, many investors were yesterday predicting sharp falls this morning in Far Eastern stock markets, which could trigger a downbeat reaction on western bourses.

Renewed turmoil on global markets would increase pressure on central bankers to provide further funding to ease liquidity difficulties in the financial system. In particular, if the London stock market opens sharply down this morning, the Bank of England will face calls to intervene directly in the crisis.

Last week, Mervyn King, the Bank's Governor surprised some by refusing to follow the lead of other central banks. While the European Central Bank and the Federal Reserve both pumped money into the system, the Bank of England did not, and made no public comment on the crisis.

While Mr King may have been seeking to reassure investors by adopting a relaxed attitude to what could yet prove to be short-term volatility - he also said last week that the credit turmoil might be positive news if it persuaded investors to take a more realistic view of risk - the lack of intervention raised eyebrows.

"For the time being, the Bank of England is being relatively sanguine," said Tom Vosa at NAB Capital. "They are telling banks if they want to get liquidity they can use the usual channels." ......(more)

The complete piece is at: http://news.independent.co.uk/business/news/article2859101.ece

[HereSince1628]

1. The Asian markets that are open seem OK for the moment.

I'll try to sleep on that thought tonite...