City waits on US 'bail out' vote

The vote on the proposed US$700bn 'bail out' of the US banking system is being keenly awaited by City analysts, desperate for some good news for the markets.

As well as acting a fillip to overall financial confidence in the US, City types believe that the rescue package currently being debated in the US could lead to an easing of tension between banks and their corporate customers here in the UK, who include large corporate pubcos replete with large piles of debt.

The result of the vote is expected this evening (Monday), UK time.

"If US politicians give the bail out the go-ahead the move will have quite an impact on confidence," said one analyst.

"The market will rally very hard after a 'yes' vote," he added.

If the bail out has the desired effect it couldn't come too soon for some stocks. Shares in listed pub companies dived sharply today after falls towards the end of last week.

Punch Taverns led the slide, down more than 18 per cent at one stage in the day's trading.

Analysts believe the market is becoming increasingly nervous about companies with a lot of debt on their books.

"Shares in any company that faces the consumer or has significant debt, as is the case with a number of pubcos, are being hammered," said another research broker.

However there was an element of a 'lemming mentality' in the way the market was currently operating, with managed pubs 'good' and all tenanted and leased operations deemed 'bad', the broker added.

"The bottom 25 to 30 per cent of the nation's pubs is suffering, which suggests the rest are doing OK.

"The question for pubcos to address is how exposed are they to the bottom 25 per cent," he said.