I suppose, on the basis that there are few problems in the world that 645,000,000,000 spondulicks would not solve, the rally yesterday had at least a basis in reality. Although, in truth, we must look at the original falls last week as being the real fantasy-land event. Even the bail-out number itself had the feeling of the ‘pull it out of the hat’ variety. You can just imagine all the central bankers sitting around a table and saying … “well, €500 bln might be seen as too little but a €trillion might spook our own domestic markets … so let’s say €750bln, nicely in the middle and not too sweet and not too sour”!

The central bankers have done it yet again. I have lost count of the number of times over the last year where the solution has been “print more money”. At some point someone will actually stand up a say “eeerrrrr … Might there be another way, a harder way, a more responsible, in the long-run, way”. But until this happens, we still appear to be on the throwing good money after bad merry-go-round.

Today sees a bit of a pull back from the huge move yesterday which is hardly surprising, as investors will still not be particularly confident of the way ahead given the sudden collapse last week. The FTSE is pretty much back at the closing level of 2009 and dealers are probably still licking their wounds. What made the drops so expensive was the fact that each of the first two falls on the 27th April and the 30th April was followed by a few days of stability tempting in traders thinking that the worst was over. Support for the FTSE is at 5295/5310 and below here at 5245/55, but the big level for bears is 4975-5025, which has proved impossible to break through since September last year. On the up side, we can see that the old top from last year at 5400 might prove difficult to get through, but there do seem few ‘real’ problems for equity markets aside from self-inflicted ones.

Impressively, the Dow and S&P held on to the out of hours move of the Europeans with the US session started yesterday afternoon, as often the Americans tend to reverse non-US trade moves. Once the dust had settled, the Dow stood just 500 points off the high (about 4pc down), which makes the move possibly a nice ‘blow out’ pressure cooker correction of the three-month continuous bull move of Feb through April. It would be good for the bulls if the Dow could remain above the 10700 support today, as otherwise we could move into a secondary bear phase, but all in all traders appear confident that the worst might be over.

Currency markets reacted positively initially to the huge fiscal injection announced over the weekend, but by the close we had given up almost all the bounce with the Euro rally from Fridays close of 1.2725 up to almost 1.31 (the big support level whose failure last Tuesday triggered the big sell-off) and is now trading back at 1.2725 as I write; a pleasant move for those with poor Long Euro positions to get out of their bets, but not too helpful for overall market stability. As commented many times 1.2325-1.2450 remains the target for the bears with the more terminal-minded looking even further at the old 1.1650/1.1750 support from 2004/05. Bulls are looking a tad desperate again this morning especially as the fiscal injection is not designed to support the currency (which the EU would like to see lower anyway), but to stabilise the debt position of some of the weaker nations.

Gold is pushing for highs once again today at 1210 dollars and a break above here must surely have the high of 2009 at 1226 as its initial target level. In an almost contrarian view to the Euro, it is the bears who are looking a touch green about the gills especially as a strengthening dollar has normally been associated with a weakening gold price. While markets look vulnerable the Precious Metal will maintain its safe haven role and I have to reluctantly admit that the response of the Central banks and the IMF to the Southern European mess is almost guaranteed to ensure continued volatility in world markets.

Oil is also proving something of a trick prospect after reaching 87 bucks a week or so ago and looking well set for 100 we now find ourselves slap bang in the middle of the last seven months trading ranges at 76.10. 74.00/74.50 looks to be very good support though and we are likely to find good buying down at these levels. Unfortunately the 12- and 15-month bull trend lines have been broken and the rally yesterday just failed to get back above them. If we stay below 78.50 for too long the pressure for a bigger bear shift may begin to grow.