Watching the news unravelling from the US last week was like watching one of those gloomy Bergman films where each take is more miserable than the last.
The already fragile markets were blown apart by Friday's rescue operation for Bear Stearns, in a week that had seen the dollar drop to new lows and gold reach new highs.
Traders now expect Federal Reserve chairman Ben Bernanke to cut interest rates again this week by at least 75 basis points. But this cut is already discounted and analysts don't see it stopping the dollar's fall. The extraordinary thing about the Bear Stearns situation is that no one knows the full extent of its exposure, least of all its executives. But at least the way in which the Fed, and JP Morgan, moved quickly to provide emergency funding on Friday should help avoid another Northern Rock. Clearly the authorities have learnt from the dithering in the UK which stopped the bank being taken over by Lloyds, suggesting that JP Morgan will take over Bear Stearns.
Bear Stearns' troubles followed hard on the heels of bad news from private equity funds such as Carlyle Group and hedge funds, which are seeing prices fall on their securities and on the heavily leveraged loans needed to fund private equity deals. What's different now is that the value of assets held by hedge funds and private equity companies is so low that they are being forced to sell to reduce their exposures, thus triggering the latest round of losses. No one wants to buy, either, because prices might fall further. It's a catch 22.
While it looks as though all the action is in the US, it is Europe that traders will be focusing on this week. They want to know how Jean-Claude Trichet at the European Central Bank will react to the euro's continuing strength. So far, Mr Trichet has boxed himself into a corner, suggesting that inflation is the ECB's main concern. The euro rose again on Friday to $1.56 and could well make it to $1.60.
Mr Trichet and his colleagues meet soon and no doubt rate cuts will be on the agenda. But the ECB is usually reluctant to use such a blunt instrument, preferring to guide rather than dictate.
What's happening now is a crisis of confidence, rather than liquidity. Even though the central banks pumped more money into the system last week, banks are still refusing to repair their balance sheets by raising capital or cutting dividends, because they are so scared. But it could be the knocks are needed to shake the system to get confidence going again. After all, the word "credit" comes from the Latin credere, meaning to trust. Right now, trust is the most underpriced commodity of all.
Race to be top at Marks
Sir Stuart Rose is usually as brilliant at publicity as he is at retailing. Everything he touches turns to gold. But the magic didn't work last week when Marks & Spencer announced that he will be stepping up to become executive chairman in June. St Michael temporarily became President Putin in the mind of investor Legal & General, which doesn't like him breaking the corporate governance code.
But the only question shareholders should ask is this: do they prefer the idea of Sir Stuart staying on until 2011, giving him and the board time to groom his successor? Sir David Michels, who becomes deputy chairman in June, is clearly lined up to be the next chairman, so that's one role ready to be filled.
Or do investors want Sir Stuart to go next year, which was the previous understanding, and take one of the many private equity jobs he has been offered?
As a modest shareholder – 200 shares, bought at 240p four years ago – I have no doubt which scenario I prefer. The reshuffle removes the job of chief executive, leaving the field open for the runners who've just been promoted to the board to fight it out, giving the top talent new portfolios to sharpen their teeth on.
Don't look just at the board to find the next chief executive, though – he or she could just as easily be on the executive committee beneath it. As well as Ian Dyson and Kate Bostock, both on the main board, the committe includes Steve Sharp, the highly rated head of marketing, who was responsible for the successful Twiggy campaign.
Insiders say that Mr Dyson is out in front while Ms Bostock, now in charge of clothing, will need to prove she wants and is up to such a role. What Sir Stuart will be watching for is the candidate with the best retail nose; the one who feels and smells the fabric and knows where it comes from. As Sir Stuart has proved, it's not something that can be taught.
La dolce vita for award-winning business leaders
Italians won hands down at CNBC's gala dinner for its 2008 European Business Leaders Awards at Claridge's last Thursday. First in the glamour stakes was CNBC's Maria Bartiromo, also known as "money honey", who handed out the awards to seven winners as judged by CNBC and the Financial Times. Business Leader of the Future went to Aditya Mittal, Lakshmi's son, whose "love for steel" was rather engaging, while Innovator of the Year was the UK's brainy Dr Mike Lynch of software firm Autonomy. The Entrepreneur of the Year award was won by Natalie Massenet for Net-a-Porter.com.
Sergio Marchionne, head of Fiat and Business Leader of the Year, captured the flavour of enterprise with his delightful thank you speech to his co-workers for turning Fiat back into profit and putting it back centre stage in the motor industry.
The last word went to an Englishman who has presided over the French beauty scene for 28 years. Sir Lindsay Owen-Jones, head of L'Oréal, was given the Lifetime Achievement Award: he's clearly worth it. You can't get more cosmopolitan than Sir Lindsay – he's lived in Paris for 30 years, and speaks Italian to his wife and French to his daughters. But he explained that he survives in France only by allowing people to assume he is Welsh. He's not; he's from Merseyside.
Farewell to Ian Kerr: he showed the City at its worst – and they loved him for it
There are always regrets when a friend and colleague dies, but the death of Ian Kerr, banker turned scribe, is particularly poignant. How annoyed he would be if he knew what he is missing! Kerr would have loved nothing better than to be writing about the bankers now running for cover at Bear Stearns, watching how saint Eliot Spitzer has turned sinner, and noting other shenanigans going on.
For decades, Kerr's pen was the scourge of the capital markets. Starting out as a broker in the City at the age of 17, he went on be a top banker at Kidder Peabody before turning to chronicle his peers in 'Euroweek' and 'Financial News'. He never failed to infuriate but always entertained friends and enemies alike. He was impossible to ignore, as last week's memorial service at Chelsea Old Church showed, when half the City turned up.
Sun King emerges from behind a cloud
Lord Browne, the former chief executive of BP, known as the Sun King, will this week make his first big public outing since leaving the petroleum giant following allegations about his personal life.
He will be taking centre stage at the Royal Geographical Society on Wednesday in a debate over the future of low-carbon energy. Also taking part is Malcolm Wicks, the minister for energy.
About 700 people are expected to attend the forum, hosted by Professor Sir Gordon Conway, president of the RGS. It is part of the society's 21st Century Challenges series on the big issues facing the world today and will give an insight into how Lord Browne sees life Beyond Petroleum.