Margareta Pagano: A long weekend off is just what the markets need

Thank goodness for those bishops at Nicea back in ad 325. By giving us an early Easter this year, the bishops may have helped avoid further meltdown and allowed the financial markets time to rally after the most extraordinary trading in decades. There might even be a case for demanding that the City's traders stay on the Swiss ski slopes or the beaches of Mustique a little longer to let tempers cool after last week's events.

Parallels with the Great Depression seemed remote only a week ago. But by late last Thursday, the talk on the trading floors in London and New York was of nothing but comparisons with the 1930s: paranoia, panic and terror was how even the most hardened traders described the mood.

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It's also the most perfect atmosphere for rumours, as witnessed by the "rogue" trader who maliciously sent out false information about HBOS, the UK's biggest mortgage lender, sending its shares crashing by a fifth. What is so pertinent about HBOS was not that one troublesome trader could cause such mischief, but that anybody in the markets would listen to him. That shows just how fragile the markets are.

We won't know until this week whether the meeting between the Bank of England and the UK's biggest banking chiefs last week will bring any relief to the markets. While Governor Mervyn King has said emergency funding will continue until the end of the month, some banking chiefs were hinting that it won't be enough to get them lending again. For now they are still refusing to lend to each other, which in itself sends bank borrowing costs rising. The danger here is that funding may dry up for corporate borrowing, particularly small businesses. The £5bn being injected into the money markets – about a quarter of the financing of British banks – will last until the end of April, when it will be reviewed again and more cash may be pumped in.

In the US people were still in a state of shock as it hit home that Bear Stearns could be sold for $2.32 a share to JPMorgan, valuing it around $339m (£170m) – when only a few weeks ago it was worth $92 a share. To make matters worse, many bankers now question whether it really was necessary to bail out Bear Stearns and think the Fed may have panicked into letting JPMorgan in through the back door. Some are suggesting that if Bear's top management had been more open publicly, then the crisis might have been averted.

The bank was also subject to massive rumours from the hedge-fund community, which sent the shares crashing to half in just a few days. That's why the spotlight has shifted to traders who "pump and dump" or "trash and crash", as the market calls it. These are people who sell short, a technique used to make money when a company's share price looks about to fall. What happens is that a trader agrees to sell shares he does not own at the present market value, hoping to buy them at a cheaper price in the market to meet his obligation. All this is perfectly normal and legal and, you could argue, the very oil that lubricates the market – just as rumours do. Short-selling has been around for hundreds of years and was blamed for many crises, including the tulip crash in Amsterdam in the 1630s.

But there is a huge difference between market gossip and deliberate, malicious rumour. Tracking down the provenance of gossip is about as difficult as herding cats but let's hope the Financial Services Authority is on to something here.

Traders are being pinpointed as mischief-makers, but banking executives should share the blame too. Too many are "lords on boards" – there for grace and favour rather than because they have any expert knowledge. And there are too few who understand why so much debt has been put off balance sheet. Banks are different from other businesses, and should be run with more transparency and more public duty in mind.

The new home guard

Complex financial derivative instruments are behind much of the mayhem we are witnessing in the markets. But there is one new interest-rate insurance product, based on a derivative contract, that may actually bring peace of mind to some of the seven million households in the UK with variable-rate mortgages.

From next month you will be able to buy an insurance product covering you for changes in mortgage repayments due to any rise in the Bank of England's base rate. The new product comes from MarketGuard, a company backed by Nick Faulks, a veteran derivatives specialist and internationally ranked (225th) chess player, who once played the mighty Kasparov.

The brainy Faulks – a mathematician trained as an actuary – was prompted to create his interest-rate protection product after the report by Professor David Miles recommending longer-term mortgages as a way of bringing stability back into the housing market. Over the past few months Faulks, and Chris Taylor, his chief executive, have managed to get the Treasury and HM Revenue & Customs to allow their products to be treated as insurance and not investment, or they would have been subjected to income tax.

MarketGuard estimates its premiums will cost about £9 a month per £100,000 of mortgage; the contracts are for two years at a time. Mortgage brokers are not going to like them because, potentially, they make it less likely that people will want to refinance – which can only be good news. MarketGuard is talking to a couple of big household names to help market its policies. Expect to see them for sale in your local building society branch or even at supermarkets.

These bosses are quite a catch, so Rentokil's extravagance makes sense

Rentokil Initial's board should be applauded for moving so swiftly to replace its management team. It should also be applauded for bringing in such a high-calibre corporate bruiser as John McAdam to be the new chairman.

Mr McAdam is a brilliant businessman and a talented scientist, having trained as a chemical physicist. As well as the Rentokil post, he is a non-executive director at J Sainsbury and Rolls-Royce and chairman designate of United Utilities. But his big moment came when he turned round ICI, taking the share price from 104p five years ago to 670p when it was sold to Akzo Nobel last year.

Joining him at Rentokil are Alan Brown as chief executive and Andy Ransom, head of corporate development, both of whom worked with him to spin their magic at ICI.

So the news that the three are each being given a package that will award them shares worth £13.5m when the price rises to at least 180p should be put in perspective. It is a remarkable amount of money, coming as it does on top of their pay and other bonuses, but if they can achieve these gains in value, all shareholders will benefit.

There is more to come: if the trio hold all their shares until the price reaches 280p for a sustained period of 60 days, they could each make £31.5m. But If they do achieve that share price, £3bn will have been added to the company's value.

Shareholders seem happy, as the bounce in Rentokil's share price to 85p on Thursday showed, and some of the biggest investors, who were so influential in getting rid of the former management, are said to be backing the pay scheme. However, it it still has to be approved at the annual meeting in May and it is by no means certain it will go through as it stands.

There are a couple of points. The first trigger for the awarding of free shares is a price of 120p, which may well be too easy a target. Second, why isn't the team encouraged to buy its own shares?

But while there may be some dissent, I suspect investors will be so grateful for the ICI team that they will back them. To have been able to snare someone of Mr McAdam's quality was worth paying over the odds. If they do want to object, then it should be over the £1.2m payoff to Douglas Flynn, the departed chief executive.

However, it does seem that the management is missing a real trick. Rentokil's 77,000 workers are said to be deeply demoralised – no surprise after the ghastly past five years during which the company has endured a number of management changes and then Sir Gerry Robinson's greedy bid for control.

This is a good time to offer them more shares through the company's employee schemes; at present they own under 1 per cent. Then they might follow their new leaders with real enthusiasm.

Dubai wins cut-price St James Square deal

The world's most sought-after office property opens in London next month at 12 St James Square, above. The timing of Dubai International Finance Centre, the financial development arm of the emirate, is good: it paid D2, the Irish property company, £107.50 and £115 a sq ft for the second and third floors. Hedge fund Permal took the two top floors last year for £130 and £140 per sq ft – the highest office rent in the world.