Monday 17th March 2008

JPMorgan Chase buys Bear Stearns for $2 per share. Confidence in the US financial system continues to tumble as market players fear there may well be a second and third Bear Stearns out there.

The Fed has stepped in overnight to reduce the discount rate by 25bp a move likened to the panic measures not seen since the Great Depression. But the US dollar has continued to tumble as have global stock markets with gold surging higher as its safe haven status attracts. Talk is now of the Fed cutting rates by as much as 1.25 per cent at its meeting on Tuesday, a move that would mark one of the most aggressive policy moves by the Fed in modern history. Increasing talk of central bank intervention to prevent the dollar falling further with the speed of the fall being the main concern. Intervention would need to be coordinated and who knows the full extent of this credit crunch right now?