Shares in Northern Rock rebounded more than 11% this morning, following the government’s promise to guarantee the deposits of any lender affected by the recent turmoil. This might not make the queues outside its branches disappear, but it seems to have soothed investors.
Alliance & Leicester, the building society whose share price has fared almost as disastrously this week, did even better – it bounced back 26%, recovering almost all its losses (perhaps not surprising, given that it has no queues and no emergency loans - plus it bought back half a million shares yesterday).
The Bank of England also seems to have calmed the market by pouring an extra £4.4bn of cash into the system, bringing the rate at which banks lend to each other back down to more normal levels. There are even reports that it is planning to review the system for savings protection (at the moment, anything over your first £35,000 could go down the pan along with your bank).
The Chancellor – who admitted yesterday that his job was on the line – will be mightily relieved about the news from the stock exchange this morning. And if this does turn out to be a turning point, both he and the Bank of England will probably be thinking that things could have been a lot worse.
But it’s not quite time to crack open the champers just yet. This evening the Federal Reserve will reveal its thoughts on the US base interest rate. And four of the big US investment banks are due to report their results this week, starting with Lehman Brothers today. If the news turns out to be worse than expected, we could be back to panic stations again by this time tomorrow.