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Federal express

Turmoil in the markets, the Fed catching us all out, Mervyn King warning of tough times ahead – not to mention the annual Davos Fest – it felt as though a whole quarter had been crammed into a single week.

I haven’t even touched upon the monoline insurers, an inflation-busting pay settlement in Germany or a leading Russian mining concern choosing to list in Hong Kong rather than London.

The biggest story was Mr Bernanke trying to head off a potential rout in the US stockmarket by cutting rates a week ahead of the regular monthly meeting. The size of the cut was unusual but acting ahead of the meeting… It was hard not to draw the conclusion that panic gripped central bankers – except here, where our own Bank of England governor made clear that cut he might, but not to match the Americans.

The wide swings in the markets must be making the lives of fund managers particularly difficult. Bank shares, as an example, have been all over the place. It may indeed be throwing up opportunities, as Bill Mott remarked recently, but easy it ain’t.

One of the greatest networking opportunities of the year was taking place in Switzerland. Half the great and the good from the worlds of business and finance were being asked for their take on markets and money. By and large, they appeared pretty upbeat, although George Soros confirmed what many of us now believe following the Fed’s action – that a US recession is now unavoidable.

The share price falls in Asia revealed the over-extended nature of many of these markets. Even after the retrenchment, China was still looking expensive compared with Europe and North America and inflation is as much a risk there as it is here. Mr King warned of the likelihood of him having to write that letter to the Chancellor while the Governor of the European Central Bank will doubtless have been well aware of the pay rise awarded to German railway workers.

The other two stories overshadowed by last week’s events were the subject of discussion outside the BBC’s Today programme studio as I prepared to talk sense about markets that appeared to have taken leave of their senses.

Monoline insurers – organisations that effectively guarantee many of the bonds created to package such debts as sub-prime mortgages – were already on my radar screen. The issue was whether the investing public realised their significance. In the end, we decided to highlight the apparent decision of United Company Rusal, the world’s biggest aluminium producer, to shift its IPO from London to Hong Kong. Coming, as it did, amid a diplomatic spat between Russia and the UK, it looked as though it could be politically motivated. But a glance at the background, with its tangle of legal actions, suggested it was not that simple. Anyway, manufacturing and service industries are heading East. Why not financial services too?

Brian Tora (brian.tora@centaur.co.uk) is principal of The Tora Partnership

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