Talk that Chinese insurers could be planning to buy stakes in their UK equivalents has lifted the beleaguered sector today. It looks like a good time to pounce, with worries about British exposure to the monoline insurers leaving their shares vulnerable.
A report in Chinese 21st Century Business Herald suggested insurer Ping An was close to taking a £7bn stake in Prudential, lifting the company's shares 37p to 655.5p. Another group, China Life, was also said to be interested in western rivals, while Aviva, up 23.5p to 610p, was also said to have attracted Chinese interest.
As for the overall market, David Buik of spread betters Cantor Index summed it up best: "Having left force 10 gale conditions yesterday morning, we are now bouncing around in choppy seas like a cork in a bath."
He added: "In 44 years in the City of London, I have never known a single day as volatile and illogical in its behaviour as yesterday was."
With the Dow down overnight but a recovery in Asia, the FTSE 100 is uncertain which way to turn, and currently stands 60.1 points lower at 5680.0.
Analysts seem convinced yesterday's shock interest rate cut by the US authorities will soon be followed by another reduction. Buik again: "Will a rate cut of this magnitude out of the blue convey a sense of panic? Probably not, but the market requires encouragement that, if required, further remedial treatment will be available. We have to remember that it takes six months for these rate cuts to take affect. So until then dreadful housing data is inevitable and dispiriting retail sales cannot be ruled out ."
Analysts at ABN Amro said: "It is hard to see the timing of [yesterday's US rate cut] as driven by anything other than by the stock market falls in Europe and Asia this week. In which case, it is also hard to see that calm will be restored to the market on a sustained basis. The market still believes that the Fed will provide a rapid follow up cut next week, factoring in at least 25 basis points and an 80% chance of a 50 basis point cut."
Back on this side of the Atlantic the minutes from the Bank of England's last meeting showed 8-1 in favour of keeping rates on hold, a slightly higher percentage than expected.
Martin Slaney of GFT Global Markets said: "Although global financial events have taken a turn for the worse in the two weeks after the meeting that these minutes refer to, this is further ammunition for the equity bears. The Bank clearly has much higher concerns over inflation than the market had perceived."
However some good news for investors. Morgan Stanley strategist Teun Draaisma, who has called the recent market turns pretty well, is slightly more positive today. He sees the current situation as a bear market, but suggests there could be a short term buying opportunity.
Writing in a note today, he says: "These kind of bear market rallies can last for 2-6 months, possibly, and are likely to be in the 10-20% range. Fundamentals continue to be weak, with an earnings recession that just started, the deleveraging process still on its way, commodity prices that could have a long way to fall, while at the same time inflation is a risk.
"If this is a mild recession then this could well be the low point for markets in this recession. If it is a more severe, global slowdown - which we think is more likely -then we may well go to lower lows after the bear market rally. But the market is oversold enough for us to be wanting to buy a bit today."
As for specific stocks, retailers were lifted by a positive note from Lehman Brothers, which said they were at historic lows. Next added 29p to £13.64 while Marks & Spencer edged up 1.25p to 433.25p.
Mike Ashley's Sports Direct rose 3.25p to 102.75p as it bought back into Finnish group Amer. It has take a 5% stake for €48.2m, having sold 12% for €166.6m in November.
Finally, ITV led the losers, down 3.3p to 70.4p after a downbeat note from Bear Stearns.
