US Federal Reserve chairman Ben Bernanke announced a 75 basis points cut in interest rates to 3.5% on 22 January.

Commentators were shocked by the Fed’s reaction, unprecedented for coming a week ahead of the scheduled rate-setting meet, and because the last time it made emergency cuts was in the days following the 9/11 attacks. Moreover, it has been 26 years since such a big cut.

The Fed pointed to tightening credit markets, a housing slump and rising unemployment ­ but no one was left in doubt as to what the message was: that recession is too close for comfort.

Bank of England Governor Mervyn King, speaking at an Institute of Directors dinner in Bristol the evening the Fed made the cuts, indicated no copycat move from the BoE and said that he thought it was the job of the markets to correct themselves, not central banks. But we’ll soon see if the UK follows the US off the contagion cliff.

Con Bonds?
Alistair Darling is waiting on the FSA to approve his plan to convert £25bn in Northern Rock debt from the Bank of England, into bonds that the stricken mortgage lender hopes will guarantee a quick sale. Northern Rock shares rose a whopping 46% on news of the offer ­ though were still about 90% below their value at the start of the year.

Davos doom
The US is definitely in for a long, hard recession, a panel of world-leading business heads decided at the annual Davos jolly in Switzerland. The BBC quoted New York-based economist Nouriel Roubini saying a “severe recession" could last as long as a year. Stephen Roach, chairman of Morgan Stanley Asia, concurred and thought that Asia, especially China, would be hard hit by the slump.

Eastern promise
Gordon Brown attended the launch of the London Stock Exchange's new office in Beijing as part of his drive to attract more Chinese business to the UK. The LSE is already home to more Chinese companies than any other major exchange globally. The office is inside Beijing's Winland International Finance Centre, its logical home with neighbours such as HSBC, Goldman Sachs, UBS, and shortly a branch of the Tokyo Stock Exchange.

Fitch likes Fair
Ratings agency Fitch has said it expects fair value management to remain the central accounting focus for analysts and investors in 2008, in light of the unravelling fallout from the credit and liquidity crunches on sub-prime mortgage-related assets, it said. The firm was to publish a report on fair value accounting as we went to press.

Enron evils
A lawsuit by investors seeking to recover around £40bn from Merrill Lynch, Barclays and Credit Suisse First Boston, following the Enron collapse, had their case rejected by the US Supreme Court, after an earlier ruling that limits the right of shareholders to pursue third parties involved in deals that involved the bankrupt energy firm.

Beyond pensions
BP will not make any contributions to its pension scheme in 2008 because, under its scheme rules, it is permitted to stop making payments once funding to cover liabilities is more than 115% ­ it is now 135%, the company says. BP is the second large oil firm to make such a move, following Royal Dutch Shell.

TECHNICAL UPDATE
Taxation
The government had another stab at taking the pain out of capital gains tax by offering an “entrepreneurs’ relief”, which effectively reduces the 18% CGT rate announced in the last pre-Budget report to 10% for the first £1m of lifetime capital gains. The new rates are expected to come into effect from April 2008.
www.hm-treasury.gov.uk

The House of Lords ruled that the three-year time bar on Condé Nast’s underclaimed VAT should be disallowed under EU law. The Law Lords said that the 1995 UK time limit regulations had been introduced without transitional arrangements. DLA Piper tax disputes partner Hartley Foster says that, as total claims from other litigants against HM Revenue & Customs may amount to £1bn, the government is likely to act swiftly. Taxpayers now have “a small window of opportunity” to submit claims to HMRC.
www.dlapiper.com/uk

Listing rules
A Financial Services Authority consultation paper on the London Stock Exchange Listing Rules suggests that it might be appropriate for international companies with a primary listing in London to abide by the same Combined Code ‘comply or explain’ requirements as UK companies and that they should also have to comply with a pre-emption rights regime equivalent to that followed by UK companies under UK company law.
www.fsa.gov.uk