Bank and govt action prevented global banking collapse

Equity markets stabilised in March and rallies witnessed since have reflected investors' belief the combined actions of Western central banks and governments have prevented a horrendous collapse in the global banking and credit systems.

Consumer and capital expenditure will remain subdued for a considerable period while households repay their battered balance sheets. The banks are similarly engaged in restoring their capital ratios. The ability of governments to embark on significant fiscal and infrastructure programmes to bolster domestic consumption and economic growth has also encouraged investor confidence. The rally, resulting in a global equity price advance of about 30% since early March, has been based on oversold conditions, aggressive global policy responses and a perception the global recession has reached it...