Comment: Hail Putin, hero of capitalist markets

An almost audible sigh of relief has greeted the prospect of an American military strike on Syria distinctly receding due to the realpolitik agreement between the US and Russia on taking over and destroying president Assad’s chemical weapons arsenal. Hawkish president Putin the markets’ hero? Strange, but true.

Those markets are keenly aware of the downward spiral of Iraq and the political fracturing of the Middle East after the coalition‑of‑the‑myopic invaded that country in 2003, and the virtually certain spike in oil prices if President Obama now authorised the bombing of Syria. The fragility of the US, UK and European recoveries makes investors worry that such a scenario could return us to recession just as we blink into the sunlight from the darkness of a five-year downturn.

It was a quadrupling of oil prices after the 1973 Arab/Israeli war that plunged the West into a recession which saw Britain bent by a three-day industrial week, power cuts, a secondary banking crisis and stock market falls.

With such painful antecedents, investors’ great relief that a peaceful neutering of Syria’s unholy chemical stockpile looks possible is understandable.

Among the biggest gainers on the stock market yesterday were transport stocks, typfied by British Airways and Iberia, on hopes the oil price will fall back on the postive Syrian developments.

Also prompting market optimism is news from across the Atlantic that former US treasury secretary Larry Summers has withdrawn from the contest to succeed Ben Bernanke as head of the US Federal Reserve.

Big institutional shareholders, and not just on Wall Street, believe Janet Yellen, current vice-chair of the American central bank, is now favourite to succeed Bernanke and that could ensure great continuity.

But, more significantly, it is thought Yellen may be less enthusiastic on tapering back the US bond-buying that has pumped money into the economy and sustained recovery as sharply as Summers might have done.

The Fed meets this week, and the mood on how quickly the bank may rein in quantitative easing has now shifted subtly towards the doveish.

Emerging markets bounced as well as Wall Street and Europe yesterday, as an oft‑understated component of Asian economic well-being is based on America being the consumer of last resort for their exports.

Those emerging markets were shaken earlier this summer when it seemed a heavy-handed turning down of the QE taps might choke that US consumer appetite.

But Russia’s Syrian demarche and the sunny Summers’ factor have been pennies from heaven.

With friends like this...

Business Secretary Vince Cable tells the Lib-Dem conference that the Tories are nasty, anti-union, anti-benefits, lukewarm on the environment, heavy-handed on immigrant minorities, callous on job security and millionaire-friendly.

They also risk creating another property bubble five years after the banks nearly stopped cashing cheques. It’s as well the Lib-Dems are in a co-operative coalition with the Conservatives or it could have got nasty.