Equity markets were volatility born again yesterday after shares first crashed to their knees in the European session only to arise Lazarus-like by the time the American markets closed. The reason? An article in the Financial Times that claimed that European finance ministers are looking at ways of recapatilising European banks. While “no formal decision” has been made according to Olli Rehn, the European Commissioner for Economic Affairs, there is “an increasingly shared view that we need a concerted, co-ordinated approach in Europe while many of the elements are done in the member states,”

So nothing really has changed, more talk about talking. Even so, the S&P added 4% in the final 45 minutes of trading led by banking shares.

The big bank worry at the moment is Dexia, a French and Belgian bank that looks set to break apart soon. Both the French and Belgian finance ministers have pledged to do all they can to protect the bank’s depositors and say they will even guarantee Dexia’s debt so it has a way of funding itself. Dexia has got into trouble because it is heavily reliant on the short-term interbank markets to fund itself, with the escalation in fears over another banking crisis this liquidity has dried up severely and hence the funding issue. You also have to remember that Dexia has already been bailed out once, back in 2008.

It wasn’t all good news last night though as a ratings agency statement once again hit the headlines. Moody’s cure Italy’s credit rating by 3 notches and remained at a negative outlook. Most of the blame was as a result of what the agency called “fragile market sentiment” but we would expect other pressures are coming from a locked up bond market which the ECB is having to jimmy open via open market operations. The political circus with Ringmaster in Chief Berlusconi will not be a positive factor either.

The economic calendar hots up today with the services PMI numbers from the EU, UK and US and the important US ADP jobs number. Of course all of these releases could be blown out of the water by an errant headline from today’s IMF meeting, a Merkel press conference or a rogue finance minister.

Both the EU and UK measures are expected to remain under pressure and the risk for the UK number is that it heads into contractionary territory (below 50.0). The US number is also expected to fall but still remain in expansionary territory. The bank of England also begins its October meeting today.

If you import or export, you’ll know that a blip in exchange rates can have a massive impact on your bottom-line.  Keeping an eye on what’s going on in the markets can be time-consuming, so currency experts World First have put it all in one place.  We’ve brought together some folk you might like to hear from. On Thursday 20^th October, World First’s Chief Economist will be joined by our Non-Executive Director Sir David Clementi (Ex-Chairman of the Prudential and former  Deputy Governor of the Bank of England) for an informed discussion about foreign exchange and the global economy.

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To register, click here: www.worldfirst.com/seminar-registration/?ID=1065

Latest exchange rates at time of writing