Amazing how short the memories…. Last year there were continual rumours of huge sums being lent to RBS, yesterday just confirmed the fact. For once the press has not ridden out slanging the banks off ‘on behalf of the taxpayer’. The fact is that banks (especially domestic units) have enormous lending books to you, me the small companies in the industrial unit down the road etc etc. Much of this is lent on a short term rolling basis. This means that a huge percentage of bank lending is covered with overnight to three month money.

Before we all throw up our hands in disgust at banks short term borrowing to cover lending just look at this the other way round. If the banks had borrowed vast sums at five to ten year rates, a couple of years ago, they would be paying 5 to 6 pc for it (now the rates are below 3). But the people who had borrowed the money would certainly be screaming if they had to pay this level (plus margin) on their loans.

Most of the £62bln lent to the HBOS and RBS would have been against perfectly reasonable loans although some would undoubtedly have been poor or doubtful debts.

Good results this morning from Compass and United Utilities while Johnson Mathey and the LSE have disappointed.

The LSE continues to find challengers from the various exchanges springing up and with many providers now merging the liquidity of these the big tickets traders will continue to desert to the cheapest transaction portal. The LSE remains the biggest player overall but for how long?

The FTSE is opening up 30 points or so repeating the trading pattern of the last few days/weeks. Clients continue to sell anywhere above 5350 and buy at the support levels of 5305 and 5240. The announcement from the US yesterday that the administration expects growth to be in the 2.5 to 3.5 pc range for 2010 has settled a few nerves and investors will be hoping that the crystal ball gazing of the US Treasury will be rather better this time round than it has proved (both positively and negatively) in the recent past. A reasonable level of expansion in the US should at least help to stop the rot over here although, probably, not enough to generate sufficient impetus to cut the rising dole queues. Unfortunately we are likely to be entering an era where those with Jobs are doing very nicely “thank you very much” but those without will have to struggle ever harder to get out of the mire. The same can probably be said for the major corporates in that we are probably at the ‘null point’ in the economic cycle so revenues should at least hold steady and productivity gains and cost cutting will improve the bottom line.

All the major popular markets remain tied in their trading ranges (bar gold of course) although Oil is looking a bit weak just at the moment. The black stuff yet again hit its low mark at 75.50 yesterday and has bounced up to the current price of 76.40. 75 dollars is the favoured level for OPEC and so we might see some comment about production slicing if the price drifts below here but the repeated failures to make headway above 80 dollars is also slightly concerning for the bulls. A few months ago the prognosis from many analysts was for 100 bucks reasonably quickly and the inexorable climb through October seemed to be confirming this. Since then though the crampons seem to have come off and every rally is followed by a sip back down to the $76-$77 ledge, for all the comments about accelerating global growth we seem to be going nowhere.

The Dollar remains the ‘Billy no mates’ of the currency markets and the various crosses overnight have been very nasty to the poor old greenback. For all the US mouthing of ‘strong dollar policy the world knows that it suits their purposes to manage a slow fall. As per our comments of many times in the past the real loser of the weak dollar environment is Europe as the Yuan is ‘pegged’. For all the huge surpluses generated by the Eastern manufacturing nations there is no currency valve to let off the pressure of unsustainable growth. Unfortunately, in the short term, Europe, Japan and the UK will be the economic zone taking the pounding. This, I believe, was the thinking behind Mervyn King’s warning on protectionism yesterday. Europe is finding it very difficult to explain to its citizens why they are having to suffer because China, Taiwan, Vietnam etc maintain artificial currency pegs. You can almost hear the sound of East-West trade barriers being built.

Gold has hit its first target level, mentioned last week, at 1175 (in fact overnight it spiked to 1180) and bulls will be eyeing the next barrier at 1194. The rolling gold contract has now had eleven straight up days which even in the current six year bull market is a record. While this eleven day run is extraordinary it has not actually forced an extreme ‘blow out’ day. Buyers are finding the push higher very easy as nobody is risking short positions and so any purchase seems to be generating another purchase and so on. At some point the elastic band effect will snap back but…. Probably not today!