Any remaining confidence in global markets has been well and truly trampled on today as investors throw in the towel. After months of bailouts, mini rallies, more bailouts and false dawns, investors have had enough. There has been a panicked flight to quality today as the yield on the shortest term US treasury bonds sink to near zero. Money is flooding to what is perceived to the safest haven in these troubled times. People would rather get next to no interest rather than risk losing their capital.

The cost of insuring against investment grade companies defaulting has shot up to its highest level since the crisis began. Worse still, Warren Buffet’s Berkshire Hathaway fund has seen the cost of its credit default swaps shoot to 5 times the level they traded at in June. At currently levels, the CDS prices are implying that Berkshire is more likely to go bust than Morgan Stanley. When investment titans such as Buffet look ready to fall, it is no wonder than investors are running to safe havens. 

It has already been a remarkable year and at current levels it stands to be one of the worst on record. However, there are small positives to be found if you look hard enough. Today the UK banking sector is performing relatively well as Lloyds shareholders look as though they will approve the HBOS merger and RBS shareholders look set to approve and new fundraising plan. In the last few minutes there has been a wicked bounce off the lows of the day, but this recovery must hold if there is to be any chance of avoiding a revisit of the 2002 lows. Today’s sell off took the S&P 500 futures within just 10 points of this level. 

Dave Evans is a market analyst for BetonMarkets, the financial fixed odds betting firm. We do not endorse the information and analysis available in this comment and it is provided purely for information purposes only and is delivered as a personal view by the writer. Under no circumstances is the information in this comment to be used or considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. The investments referred to herein may not be suitable investments for all persons accessing this page. You should carefully consider whether all or any of these are suitable investments for you and if in any doubt consult an independent adviser. We accept no liability whatsoever for any direct or consequential loss arising from use of the information on this web page. Please see our Terms and Conditions.