City: Arrival of Clarke means little to City

WHAT DOES the arrival of Kenneth Clarke at No 11 mean for the markets? Arguably very little. The reputations of both the Treasury and the Chancellor have been so badly damaged in the City by repeated forecasting errors, the worst recession in living memory and the ERM fiasco, that it may no longer matter too much who's got the job. The City in any case takes the view that it is the markets that run the economy these days, not the Government. But to the extent that in the City's eyes anyone has to be better than Norman Lamont, the move is bound to be welcomed. Mr Clarke carries more political clout than Mr Lamont, and he is therefore going to have more clout in the City. But he faces exactly the same underlying conundrum - how to cut the deficit without damaging Britain's fragile economic recovery. With his ambitions firmly set on higher things (the premiership), Mr Clarke may be laxer on the deficit than his predecessor and keener on hastening recovery with further interest rate cuts. It also seems reasonable to assume he'll be more firmly rooted in the real economy than Mr Lamont. That has got to be good news for equities, if not the pound.