Bad times are far from over for stocks

With billions of world governments' money pumped into the banking system, we should have avoided a total financial meltdown. But a global recession is still on the cards.

This week we were spared another Black Monday. Last week saw a historic wipe-out: the S&P 500 slumped by 18%, its worst week since the 1930s, and the FTSE 100 lost over a fifth of its value. But on Monday there was a record rebound in Europe and an 11.6% jump in American stocks, the best day since the recovery from the 1929 crash.

"The dithering has ended," as Economist.com puts it. Last week investors feared that the intensifying squeeze in the money markets threatened to cut off funding for banks and companies (we highlighted some examples in last week's issue) and thus cause a global economic meltdown. Now Europe has followed the UK's lead in bailing out its banking systems, with the continent pledging a total of just over £1trn. As in the UK, Europe will guarantee interbank debt and inject capital into the sector. America is to pledge $250bn to recapitalise banks and will also guarantee interbank loans.

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