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The world remains on a knife-edge. After a period of relative calm following the bailout of Credit Suisse, the FTSE 100 has ended the week firmly in the red again amid another sharp sell-off in bank stocks.
Despite reassurances from, among others, the Bank of England governor and German chancellor Olaf Scholz about the relative strength of the financial system compared to the 2008 crash, financial markets are far from convinced.
As fears of contagion and further government and regulatory intervention linger, investors are hunting for the next weakest link. With its shares tumbling more than 15pc in early Friday trading and the cost of insuring its debts against default surging to a four-year high, the smart money is now on Deutsche Bank to be the next domino to fall. As of lunchtime, the markets were pricing in a 31pc likelihood of default probability on its unsecured bonds.
Even if the German giant has bags of liquidity to withstand a crunch, as some commentators have pointed out, the scary thing is it may not matter. As is often the case in banking crises, fears about Deutsche Bank could quickly become a self-fulfilling prophecy. On paper, Credit Suisse should never have needed rescuing but in the end, a loss of market and customer confidence effectively killed it.
Amid such a febrile atmosphere – and a longstanding cocktail of ruinous inflation, seemingly unending interest rate rises, and a fragile geopolitical situation – it may seem strange to talk about green shoots. Yet, they exist in increasing numbers, and if another financial meltdown can be averted – a big “if” admittedly – then the global economy could bounce back quite quickly.
As ever, it pays to look closely at what is happening in the business world where there are some tentative signs of a recovery, and pockets of cautious optimism.
Wetherspoons, in the hands of entrepreneurial chairman and majority shareholder Tim Martin, has suddenly come back to life after a brutal pandemic.
Turnover is above pre-Covid levels and the pub chain has returned to profit, a strong sign that consumers at least aren’t allowing all the doom and gloom to dampen their enthusiasm for cutting loose. Martin’s comments about how he is looking forward to “ferocious” inflationary pressures easing are hugely reassuring too.
Elsewhere, DIY outfit Wickes has reported record sales and its boss David Wood has talked of a “bright” outlook, led by younger people spending money sprucing up their rental houses.
Sports Direct has rarely followed the crowd, and always has its eye out for a good deal, but when boss Michael Murray enthuses about hunting for targets in Europe, it is a sign that animal spirits remain alive.