Hey folks. Mr FT is over here in Dublin (so not blogging today). And as we saw the most amazing drop in the Irish markets on Tuesday (followed by something of a bounce) I thought I’d do a bit of blogging myself. So here’s a quick(ish) round-up of what’s been going on in these “interesting times”.

A 30-Second Summary
There’s potential for a busy day on the markets today. First off there’s the high-noon statement from the Bank of England on interest rates. Then, here in Dublin, the Irish Central Bank’s annual report and economic outlook is also due over the course of the morning. Meanwhile in the US the big wigs in Washington have a hearing at 10am(EDT) with Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson (market analysts say they are expecting clarification about the financial health of Fannie Mae and the smaller Freddie Mac).

High-noon
The official announcement on UK interest rates takes place at 12pm. However Bank of England governor Mervyn King yesterday confirmed expectatins that interest rates would remain unchanged at 5.00% despite inflation concerns.

He suggested that rates would be held at present levels until the current turmoil in financial markets passed, with households already facing increased borrowing costs as banking groups pass on steep rises in inter-bank lending rates.

What a job poor old Mervyn’s got. The National Consumer Confidence Index fell four points to 61 and the economy only managed growth of 0.3 per cent during the first three months of 2008, the lowest quarterly expansion for three years. However UK inflation figures hit a 16-year high of 3.3 per cent in May. The phrase “between a rock and a hard place” doesn’t really seem to do the situation justice. Maybe we need another phrase … somehting like “between a really realy big rock and a very hard place indeed.” Or “between a hard concrete pavement and a big american-style fridge-fever that’s just fallen out of a 12th story window”.

Anyway yesterday Merv also blamed a “mis-pricing of risk in the financial system” for the current credit crunch. Goodness. The man’s perspacity is simply amazing.

FYI last week, the Bank of England said it was prepared to pump billions extra into money markets to help those commercial banks hit by soaring inter-bank lending rates (as lenders fearful of exposure to bad debts become more cautious). But it also warned that providing short-term liquidity to markets in trouble encourages excessive risk-taking and sows the seeds of a future financial crisis.

What goes up . . .
Back to more recent times and Britain’s blue-chip index ended 1.6 per cent higher yesterday as besieged banking stocks rebounded. The bank sector as a whole rallied, helped by the Fed which has promised to provide easier lending to investment banks.

Leading shares continued their recent rollercoaster ride. Lifted by Tuesday’s late rally on Wall Street, the FTSE 100 closed 89.1 points, or 1.6 per cent, higher at 5,529.6, recouping all of the losses sustained in the previous session. But a Reuters report this morning said that with volumes were thin (so the chances of the rise staying …errr … risen are slimmer than usual).

Barclays, Royal Bank of Scotland, HSBC, HBOS, Lloyds TSB and Standard Chartered all made decent advances. However the star of the day was Bradford & Bingley which, unless you’ve been holidaying on the moon, you’ll know has been battered by concerns over its future. B&B bounced 27.2 per cent.

Oh, and the prize for telling us what we already know goes to Mike Lenhoff, chief market strategist at Brewin Dolphin:
“Equity markets are reacting to the likelihood of recession. The U.S. economy is verging on recession and, as for the UK, a recession may be under way already …. Interest rates and oil prices need to come down before confidence in equity markets returns.”

I wonder how much Mr Lenhoff is getting paid. And how do I get a job like that …

Fannie And Freddie In The Spotlight
With US financial stocks on Wednesday suffering their worst one-day fall since the credit crisis began there’s some speculation that Washington big wigs may question Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson at a 10 a.m. (EDT) hearing today about the financial health of Fannie Mae and Freddie Mac and as to whether they jeopardize the financial system.

Chances are increasing that the U.S. may need to bail out Fannie and Freddie, former St. Louis Federal Reserve President William Poole said in an interview with Bloomberg yesterday. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair value and there may be an indication of that later today.

The major indexes fell more than two per cent while the Dow Jones Industrial Average lost more than 230 points. Investors worried that the mortgage finance companies will have to sell more shares than anticipated to compensate for losses from the housing slump.

The plunge in Fannie Mae and Freddie Mac yesterday in New York Stock Exchange trading led financial shares to their biggest decline in six years and sent the Standard & Poor’s 500 Index into its first bear market since 2002. Fannie Mae shares dropped $2.31 to $15.31 and Freddie Mac declined $3.20 to $10.26.

Irish Eyes …
On the ISEQ, shares rebounded after one of the worst day’s trading in its history on Tuesday, but still came nowhere near reclaiming the bulk of the losses sustained.
Bank of Ireland led the financials recovery, as it wiped out most of the losses it suffered the previous day and closed up by over 7 per cent to €4.83.

In a day of light enough trading, AIB was the next best performing financial, closing up by 45 cents or by 5.6 per cent, while both Irish Life & Permanent and Anglo Irish Bank also saw their share prices increase. Irish Life and Anglo also posted gains of over 4% each.

However, there are a number of indicators in the offing this morning as well as the Central Bank’s annual report and outlook for the remainder of the year.
In quick succession there will be; June inflation figures (11am ), May industrial production (11am) and of course the Central Bank’s annual report and, more importantly, annual outlook (11am).

Have fun.