Friday's bloodbath on the Dow (a fall of nearly 400 points) and the big jump in oil prices to over $139 a barrel suggests another white-knuckle ride in the City tomorrow. The sharp and unexpected rise in US jobless figures suggests the US economy is heading into a recession and, for reasons long debated elsewhere and here, we won't be far behind.
IF the Dow opens higher (as I expect it to) on Monday afternoon London will rally but a sharp fall of maybe 100-150 points looks possible for the FTSE.
Meanwhile, the ever more ludicrous and opportunist Tories showed their real colours when calling on the MPC to cut rates last week. I'm sure the MPC would love to cut rates but there is the not inconsiderbale matter of inflation. Once again, the Conservatives seem unable to comprehend the new economic reality we have entered. The days when a couple of interest rate cuts would make everything fine again are long over. The debt mountain of Government spending needs to be addressed in the shorter term.
We have yet to hear anything coherent from George Osborne or David Cameron on this - commitments to matching Labour spending on health and education as well as more money for the Police, armed forces and prisons aren't a recipe for bringing down spending as a share of GDP back toward 40%. It's easy in a strong economy to reduce the share of GDP used by spending - you simply increase spending less than the economy.
In an economy of very low or even negative growth, cutting spending means REAL cuts in real terms. There is the usual blather about Government "waste" but that will save millions, the true requirement is for billions in spending cuts or Osborne will find himself having to raise taxes much as Alastair Darling has had to.