IN the end Hurricane Irene turned out to be mercifully less destructive than feared. Many New Yorkers were able to be at their desks yesterday after all, even after the dire warnings of Mayor Bloomberg who had ordered a mandatory evacuation of 370,000 people in low-lying areas.
Bloomberg is being criticised for being alarmist, but he would have faced far more stinging criticism if he had done nothing and the effects of the hurricane had been even worse.
The events in recent days in New York remind me of the extraordinary times in London in October 1987 when a storm of extreme force coincided with a few days of tumbling share prices. The London storms were so strong that the financial markets were closed on 16 October and when they reopened the following week they did so with a crash, followed in many different territories.
Rationally there would be little to link a freak weather incident with falling share prices, although the sheer alarm and panic provoked by the London storms really did seem to cause panic in the financial markets, where those traders who had managed to make it into their offices just looked on in horror as share prices fell seemingly uncontrollably.
An uneasy climate for financial stocks, already nervous because of underlying adverse market conditions, appeared to be tipped over the edge by the exceptional weather conditions and it took days for both the weather and stock trading to return to normal.
Yesterday’s better than expected weather conditions across the Atlantic were accompanied by positive trading on Wall Street, which was bolstered also by two financial events.
The first, although expected, was Bank of America’s sale of part of its shareholding in the Chinese bank, China Construction Bank Corp, booking a $3.3bn gain. This comes just days after Warren Buffett’s decision to invest $5bn in the bank and continues chief executive Brian Moynihan’s strategy of disposing of non-core assets in order to ensure the bank meets capital ratio targets. The two events do not mean that Bank of America, which is still horrendously vulnerable to its exposure to huge quantities of sub-prime mortgages, is in the clear. But it is definitely on a stronger footing.
The second bit of good news for the financial markets was confirmation of the merger between the two Greek banks Alpha and Eurobank.
The deal is being supported by a group of Qatari investors, who will take a 15 per cent stake in the combined group. If Qatari investors believe in the merger, the deal will fly, or so the theory goes, maybe a touch simplistically.
Neither a merger of two troubled Greek banks backed by a wealthy middle eastern investor nor a capital raising sell-off by one of the problem banks in the US will be sufficient to sort the woes of troubled markets.
But in these times it good to hang on to every crumb of comfort even though, as one New Yorker told me yesterday, there can be a strange sense of anticlimax when you realise that you won’t, after all, be a witness to catastrophic events.
The summer holidays are over, as is the August so-called silly season for news. Calm heads may be required. Preparing for the worst, as Bloomberg did, may be the best approach. You may just get a pleasant surprise.
Allister Heath is away