On Monday morning, as fresh news of severe losses by the giant financial groups, UBS and Citigroup, revealed even more damage inflicted by this summer’s credit squeeze, the reaction of stock markets was clear. They rallied.

In Monday’s trading, the Dow Jones Industrial Average, still the most widely watched index of the US stock market, managed to top the all-time peak it reached on July 19. This was broadly representative of the most important developed market indices. The US S&P 500 index and Germany’s Dax index are within 1 and 2 per cent respectively of their mid-July highs.