Today didn’t start off too well, with a big loss reported by Aviva dragging the rest of the insurance sector down with it, as well as weighing on the FTSE all morning.  However the main event was at lunch time, with the Bank of England announcing the latest rate cut.  No surprises here as rates were dropped to 0.5 percent and market reaction was negligible.  What was of more interest was confirmation that quantitative easing would start, which of course doesn’t involve printing more money. The plan is to increase the amount of money in the system by £75 billion in the hope that banks become a lot more willing to lend it out.

At the moment financial markets don’t seem to be getting too excited about the idea. We are now some way into this crisis and various approaches have been tried around the world, with no real signs of stimulating the economy or bank lending - so it’s not too surprising that battle-weary investors are a bit sceptical that this latest idea is going to have any real effect. The problem is that many want the governments and central banks to do something to get things moving, but the current state of the economy is all new to them too, so it is maybe a little unfair to expect a silver bullet that makes the bad times go away.  With the FTSE 100 still unable to hang onto any brief recoveries and US markets sliding back to the lows for the week, Friday’s unemployment numbers out of the US are likely to add even more volatility than normal to global financial markets.

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