Worse than last year

Witht the close tonigth Equities are now lower than at any time in January of last year.

Banks all over the world has been under heavy pressure Monday and Tuesday after the bank bailout announced in the UK on Monday. The problem with these bailouts are that they are insufficient and too costly for the different governments. No bank have been spared from the killing fields in the last few days. See this very good and short good description of the only real solution. Such a solution is not coming in the first round, but is probably the right one even though a number of pensions fund would have to be bailed out but tax payer money.

The close today in S&P could make a good place for a rally if investor believe what IBM says in their report tonight that beats expectations, but do we really believe a software company these days?

But maybe we need VIX to move higher for that to happen. It is still relatively low here at 57.

And with expectations for as reported earnings in S&P at around 40 giving a P/E of 20 there is plenty of room on the downside, but as usual a rally can always show up. See in 2008 where we actually rallied into mid February from this point in January.

Eurostoxx is the equity index futures closest the the former low at 2113 with a close today at 2167 (settlement price 2200 from 17.30 CET)

Bunds came back today after some selling yesterday, but still closed well below Fridays high. This is the first time in the last four option expiration weeks since October that bunds have traded so poorly.

One of the reason for the selling has been pressure from Gilts in the UK driven by fear of expanding government issue activity and fiscal imbalances from state intervention in banks. Also selling amid tension in the Euro government market is putting some pressure on fixed income in general. See interest rates and spreads in 10 year segment below.