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After central banks dropped a coordinated liquidity bomb overnight, global equity and credit markets have reacted well. Although the bounce off the lows is at least a step in the right direction, the impact still has to be seen as cautious at best. Today, investors and financial institutions have shut the door on the financial apocalypse, but the storm is still there. It will be some time before investors will step out side confidently from the safety of the sidelines. Although equity markets are bouncing the panic has reached such an extreme that the yield on 3 month US Treasuries reached 0.02% yesterday, returning just $2 on a $10,000 investment. Investors aren’t just running to safety, they were blindly staggering to anywhere with no exposure to the credit markets. When investors press the panic button as they undoubtedly have done, there is the potential for a counter rally to set in the short term. These exhaustion lows are almost impossible to time perfectly, and require a better response than we are seeing today to set them in motion, but there at least the potential for a short term bottom to be formed in and around the next few days.

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The FTSE is currently indicating a higher opening as a buyout of HBOS by Lloyds TSB, has the blessing of the UK government. Sources indicate that the government will seek to waive antitrust restrictions to permit the takeover. Look for other vulnerable companies to get a boost in share price, as traders are counting on cashing in on another takeover.

Commodities benefited from the turmoil in the US equities market yesterday with gold adding more then 70 dollars to its value and oil adding 6 dollars to its per barrel price. We can see gold reaching 900 dollars per ounce before the end of the week, as investors are running for the safe haven that precious metals provided during turbulent times like this week

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