BEN KIILU

The FTSE 100 today suffered its biggest one-day fall since the terrorist attacks on the World Trade Centre more than six years ago as fears about the prospects for the global economy took hold..

Events as seen in the eyes of traders

Martin Slaney, at GFT Global Markets, said: “A gloomy concoction of poor economic and corporate news plus a growing acceptance that the sub-prime fall-out has much further to go has created the highly distressed conditions for a global sell-off in equities. The latest rumour is that the Bank of China may write off as much as $1bn in sub-prime related losses have added to the negativity,”.

David Jones, technical analyst at spread-betters IG Index, had this to say: “The catalyst for this ongoing weakness appears to be further slides in the Asian markets overnight, continuing the weakness seen on Wall Street during late Friday trading. The lack of detail in Friday’s proposals (Referring to President George W. Bush’s stimulus package), outlined by President Bush, on how to provide stimulus for the US economy has done little to ease current negative sentiment for global financial markets. Although US markets are closed for Martin Luther King Jr. Day, US index futures have been similarly hit and we are currently quoting the Dow around 250 points lower than Friday’s close.

“Moving back to the FTSE, this morning saw it sail straight through the 2007 lows at 5800. Although the market has found some early support ahead of 5720, many will probably want to see at the very least the 6000 level regained to suggest the current bout of selling is running out of steam.”

Sue Trinh at RBC Capital Markets said “Equity markets greeted the news [of the stimulus package] with a resounding thud,”.

Meanwhile, Graham Secker, equity strategist at Morgan Stanley, said: ‘There have been some extravagant moves in the market today. It looks like some recognition of an end to the idea that the US can go into recession, but the rest of the world can be OK. The weakness in the miners supports that view.’

Ladies and Gentlemen

What we are about to witness will alter the dynamics of structured finance and reckless lending. The question is:

1. are we witnessing the start of a recession or
2. is this an opportunity to trade in short?
3. Is it an opportunity to trade long at these low levels hoping for a rally in a year of two?