Tonight:
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City traders see first ray of sunshine amid chaos
Robert Mendick, Chief Reporter8 Oct 2008
- Stock markets plunge amid recession fear
- The sphinx in the eye of a growing storm
- The £500 billion gamble: Darling's historic bank rescue
- City cautiously welcomes ‘positive, sensible move’
- Countdown to Chancellor's bail-out
- This £500bn might be enough if ... and it’s a very big if
- Yes, this really does mean part-nationalisation
- Poll: Does Darling know what he is doing?
“The interest rate cut took us all by surprise. We went absolutely crazy in here again,” said market analyst James Hughes as he reflected on today's announcements.
“There's a bit more optimism, but, equally, this could just be seen as another panic measure.”
Mr Hughes, 25, who works at CMC Markets, a financial spread betting firm on the edge of the Square Mile, went on: “There is still serious pressure out there, but now we are seeing the upside.”
City banker Bruce Hatton, 33, was enjoying the sunshine outside the Stock Exchange. He finds himself trying to recover £50,000 he deposited with failed Icelandic bank Icesave, but was
cautiously optimistic.
He believes today's announcements are the “foundations to provide stability in the market”.
“I don't think this is going to change the world. But I do think it's putting in place some form of foundations in the face of all the turmoil. This is what we've been looking for since July last year, when the credit crunch first started to take its toll.”
At CMC, traders on the floor were taken by surprise by the midday cut of half a point in interest rates, which saw the FTSE 100 bounce back after a rollercoaster morning.
Earlier the traders, none of them older than 40, stared at the grey-haired man addressing them from the giant television screens hanging from the dealing room walls.
As Chancellor Alistair Darling spoke the telephones across the dealing room began to ring. And they carried on ringing as clients called in to place their bets on a market which opened down around 200 points on the back of a disastrous day's trading in Japan. By 8am, as markets opened, the noise in the dealing room began to rise. Traders, telephones cradled between ear and shoulder, shouted out prices of stocks as clients made their moves.
Within an hour, the rescue plan appeared to be turning to dust with the FTSE 100 down 350 points, including dramatic falls in the shares of banks Mr Darling was supposed to be saving.
“RBS has hit a new low,” declared one trader at around 9am. “Ouch,” retorted another. “Oooh,” echoed a third.
Matt Buckland, 36, a trader who was heading home after an arduous night shift watching the Far East markets, was less than impressed by Mr Darling's rescue bid.
“It's too little too late,” he said. “The whole problem with the banking sector is not just the lack of confidence in the markets but a lack of confidence in the Government. It is too little too late.
“To come out with his statement half an hour before the market opens is ridiculous. They have been faffing about for days when they should have been planning this over weeks. But to announce it with 30 minutes to go is not enough time to digest.”
Gary Thomson, CMC's head of sales trading, said just after 9am: “The rescue package doesn't seem to be making a great deal of difference this morning.”
CMC traded $1.4 trillion in shares last year. Analyst Mr Hughes said: “The telephones haven't stopped ringing this morning and I expect them to ring all day. Something needed to be done. But we have seen a $700 billion bail-out from the US which is not enough and so whether £50 billion can be enough in the UK remains to be seen. There will be suspicions about it.
By 9.30am, with Gordon Brown and his Chancellor in an emergency press conference at Downing Street, the markets had begun to calm down, the losses marginally not as bad as in early trading.
At one stage only HBOS — of the big banks — showed a rise in shares although then RBS showed a healthy rise.
Mr Brown and Mr Darling were telling the traders that they were finally hoping for peace in our time. But the traders at CMC weren't listening. “We're too busy to be sat there watching Gordon Brown and Alistair Darling,” explained Mr Hughes. It will only become clear in the coming days if the rest of the City has stopped listening too.
Reader views (14)
These guys are brokers not traders (CMC Markets) Big difference....
- Mark, gibraltar, 08/10/2008 15:19
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Marianne: For those of us who have been near a trading floor and consider that there are valid points of view being expressed by others, what precisely is the point that you are making?
The behaviour of market traders (including their psychology and incentives) is an issue that needs to be addressed by the senior levels in the financial institutions and the regulatory authorities. There is a cat and mouse game being played that has gotten out of hand and has become nihilistic.
- David, London, 08/10/2008 15:03
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I have never been near a trading floor in my life, either, but I have a gut feeling the comment by Marianne, from S W France, is spot on. There are too many wiseacres and barroom lawyers about who know exactly what went wrong and exactly what should be done to put it right, but I know from my field of work that too many are inclined to pass comment on matters of which they no absolutely nothing at all. And never will, because they are so full of their own prejudices.
- Patrick Powell, st breward, 08/10/2008 14:52
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So what is your plan, then, Marianne?
- Jack Street, London, 08/10/2008 14:32
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Everyone is a spread better. If you brought a holiday or clothes on credit, a car or a house at outlandish multiples against your annual income, you were betting on the economy always rising and inflating the underlying asset value of your home, on which everything was dependent.
Once those house prices fell, everything else begins to fall. Did everyone forget that old maxim, what goes up, must come down? Now it's coming down again.
In a few years it will go up again. Ladies and gentlemen, place your bets - and stop blaming everyone else. You are all as much to blame if you played the game.
- Stephen Rothbart, Prague, Czech Republic, 08/10/2008 14:28
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Our hopeless government has it's share of the blame too. How preening Gord loved to boast of his handling of the economy as the bubble grew bigger and bigger. Now it has burst Gordo is, as befits an out and out coward, busy trying to spin himslef into a completely different position. Couldn't make it up.
- Mac, London, 08/10/2008 13:47
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Graham, M Smith and Jack Street: 3 people who've clearly NEVER been near a trading floor.
- Marianne, S W France, 08/10/2008 13:20
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The banks and their traders put us in this mess (through over confidence) and now worsen it by by screaming 'the sky is falling!'. Can we get some grown ups working in the financial sector please?
- Graham, Reading, 08/10/2008 12:17
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Traders/banks - they make me laugh, what other organisation can run up thousands of pounds in bad investments, then go on to lose millions and get bailed out by the government at the tune of 500 billion, while they continue to receive massive bonuses???
- M Smith, London, 08/10/2008 11:31
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Bankers, bankers, what more do you want? If you can't trust each other, if you can't lend to each other, what is the point of you?
- Jack Street, London, 08/10/2008 11:18
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Oh good - I'm really glad to have received the considered wisdom and insight of the very sort of spiv who helped plunge us in to this mess. Very reassuring.
- Shaun, SE France, 08/10/2008 11:12
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Nothing is going to save this market. Not even the pumpers at CNBC. The market is overleveraged, the world Govts have too much debt and the consumers have too much debt. All that is going to happen is that this will temporarily ie days maybe a couple of weeks support the market, but hell is coming. They will lower interest rates to try and stop deflation and this will lead to hyper inflation due to excess money supply. Oh dear, bad times are a cumin for all those stupid enough to have bought into this debt riddled world of hype.
- Mgrelton, London, 08/10/2008 11:11
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Spread betting firms?! As if the city didn't have enough traders dealing with things that don't physically exist! These guys are the bottom of the pile so god knows why their opinion counts!
- Justin, London, 08/10/2008 11:05
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Those traders NEVER stop complaining - yet isn't it their FEAR that continues to generate the wipeouts on the markets? Our economy cannot be left in the hands of the spineless.
- Karli, Tottenham, London, 08/10/2008 10:15
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