It is a month until Christmas Day and I expect kids across the world have already sent lists of goodies to Santa with exhortations of how good they have been and how deserving they are. Alistair Darling probably won’t have written a letter to Old St. Nick but will have been hoping for an early present in the form of yesterday’s UK GDP release.

This was of course the reappraisal of the disastrous -0.4% reading every economist and politician missed and that caused a huge kerfuffle over the intricacies of ONS data. The economists got it right yesterday however with growth meeting consensus at -0.3%. The UK is still in recession; the next form of growth estimates will come in the Darling’s pre-budget report due Dec 9th.

The fact that we are still in a recession hurt the pound yesterday as it lost close on a full percentage point against EUR, JPY, AUD, NZD and pretty much everything else. Everything except the US dollar which is in all kinds of difficulty.

The US dollar index moved to a 16 month low yesterday as traders continued to pile on bets that the weakness would continue. Major falls came against the Swiss Franc which is flirting like a drunken PA with parity, the Japanese Yen and the Euro. Dollar may find strength in equity market falls especially if further bad news comes from the Middle East.

For there is trouble brewing in the playground of the rich and famous. Dubai World, the UAE government property development firm has asked for a standstill on its debt obligations for 6 months. It is due to pay back $4bn on an Islamic bond come Dec 14^th. The price of insuring UAE government debt rose from 287bp to 420bp on the belief that a default could be on the cards. Were this to happen real estate around the world would feel the effects while banks would once again be looking for help to get rid of swathes of toxic debt. Another equity and world market apocalypse in other words.

As it is thanksgiving in the US markets are should be fairly quiet ahead of Black Friday. To all our US readers may we wish you a happy turkey day and if there’s any pumpkin pie left feel free to send it in!

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