City Republic: An end to the slump in sight?

Some don't of course; legendary investor Warren Buffet, the so-called "sage of Omaha" has been uncorking his cheque book recently. Warren has seen it all before of course, having been a big investor for 50 years.

One reason that markets might have further to fall is oil.

The rampant oil price (which hit a peak of $146 a barrel last week on renewed fears of a conflict between Israel and Iran) may be causing all sorts of problems all over the world but it has also helped the share prices of the major oil companies whose profits have soared.

It has also boosted the coffers of so-called "sovereign" wealth funds, mostly in oil producing countries, which have used some of the money to bail out American and British banks caught by the credit crunch.

The other prop for stock markets has been miners, also benefiting from sky-high prices. Take away these two groups and stock markets worldwide would be a heck of a lot lower.

But the oil price is falling back (it fell $6 overnight to $136, the biggest one-day fall in 17 years) as an emerging global slowdown hits demand. Even Americans and Europeans are driving less, a trend which, if it continues, could produce all sorts of unexpected (and mostly benign) consequences.

The markets will turn when the boost to consumption and the wider economy (including banking) from lower commodity prices and receding inflation is perceived to outweigh the losses from the falling share prices of commodity producers.

Another, and increasingly important, factor is the new-found eagerness of the authorities on both sides of the Atlantic to curb the activities of "short sellers", funds that borrow stock to buy it back later when the price falls.

It's not the fear of being punished that's stopping the shorters (short-selling is not illegal) but the reluctance of banks and insurance companies to loan stock at anything but prohibitive cost.

These companies have finally woken up to the reality that the short term gain from lending stock is far outweighed by the damage to their investments from falling markets and the need to bail out struggling banks and the like.

They will also have been leant on by politicians and regulators.

It will all end in tears if another war breaks out in the Middle East, of course. But surely not even George Bush and Dick Cheney are daft enough to encourage another one of those?

German establishment closes ranks
The German economy is finally regaining its former glory as Europe's powerhouse, 20 years or so after the fall of the Berlin wall and the struggle to re-incorporate the much poorer old East Germany.

We've seen Porsche effectively take over VW without the trouble of making a full bid and now ball-bearing maker Schaeffler Group has launched Europe's biggest takeover attempt this year with an €11.2bn bid for tyre and auto parts maker Continental.

Schaeffler already speaks for 36% of the votes in Continental (German companies are still structured in a variety of complex ways) and says it will be happy if its offer results in it gaining 30% of the shares.

Some huge German companies are still effectively controlled by the founding families (BMW, Axel Springer, Bertelsmann and Porsche, of course) and at Schaeffler Mara-Elizabeth Schaeffler, the widow of the company's founder, holds the reins.

The German establishment doesn't take kindly to its ambitions being thwarted by freebooting US and British companies.

As Sir Martin Sorrell at WPP is no doubt aware as he waits to see if a counter-bid for TNS emerges from German research giant GfK. 

GM drops dividend, shares rise
It's not often that a major company drops its dividend to shareholders and the shares rise but that's what happened to General Motors yesterday.

Its shares were the biggest riser on another embattled day for Wall Street as the US's biggest car producer announced that its priority was to save cash.

The US car industry is in meltdown as higher fuel costs and a product line-up weighted to gas-guzzling 4x4s and pick-up trucks lead to multi-billion losses.

So GM has said it wants to generate an extra $15bn in cash to see it through the hard times and produce, belatedly, a range of fuel-efficient cars and trucks.

Better late than never, I suppose.

Stephen Foster is a former news editor of Campaign, former editor of Marketing Week and Evening Standard ad columnist. He is a partner in Editorial Partnership and writes the blog www.editco.net and Politics of the Media for Brand Republic.