“If you lived your life in London you would often be left with the impression that the economy is about to fall off a cliff. From my visits around the country I can assure you it is not.”

Its annual conference starts today, and a recent survey of British business finds “resilience” in the face of the credit crunch. Only about a quarter of firms have found it tougher to raise finance and 60% have left their business plans unchanged. The pound’s fall against the euro also helps exports and rebalance Britain’s yawning current account deficit.

*** News from the mortgage frontline…

“Mortgage fees have tripled,” Quentin tells me at the week-end.

He plies a book-keeping and mortgage business from a quiet village in Gloucestershire and gave us an update on the credit crunch from the business end.

Continues below …

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And the new HSBC offer to match your previous fixed rate appears to co

“A client looking to re-mortgage £150,000 on a £400,000 valuation and more than £70,000 income can get the money at the same rate, but HSBC want a fee of £4,900 for their trouble! When I suggested that was verging on the extortionate for a quality customer they said they might be able to do something if my client agreed to swerve his property insurance to them. They’re not supposed to be able to do that anymore!”

Well, business is business. The strong survive and charge ‘what the market will bear’. The weak get crushed. The bit part players of the UK mortgage scene have either been extinguished or sidelined. The door is now wide open for those left standing to pick up both market share and margin.

*** Brazil may have struck oil big time with first its Tupi discovery (est. 8bn barrels), and more recently its Carioca discovery (est. 33bn barrels), which jointly could put them into the super league of oil exporters but but but… the technical changes are greater than ever.

Their latest offshore find will have go six miles below sea level, reports Bloomberg. It’s almost twice as deep as the world’s current deepest offshore well. To suck out the oil they will need for equipment that can withstand pressure that would crush a truck, pipes that can carry boiling hot oil at 500 o Fahrenheit (260 o Celsius) and drill bits that can bore through a mile of rock salt sea bed.

Exxon Mobil and Chevron’s deep water drilling attempts in the Gulf of Mexico saw diamond encrusted drill bits disintegrate and steel pipes crumple.

Such a huge engineering challenge calls into question whether the discovery is of any use. It may useless, says Tina Vittal, an S&P oil analyst:

“A big find might not be a good find if it costs so much to develop that it’s not commercially viable. We don’t have any idea at all yet of all the costs that are going to be involved. Those costs are going to set the floor for oil prices.”

And today’s floor for the oil price is almost $119.

Today, OPEC president Chakib Khalil gives warning oil could hit $200 on account of a weak dollar. Though, interestingly, Lehman Bros note though that about $20-30 of the price is “hot money”. It believes the oil boom may be coming to an end as new refineries and new projects come on stream.

So are commodities another bubble in search of a pin? The FT’s Neil Hume adds his thoughts on the subject at the week-end. He looks at the similarities between the mining boom and the dotcom bubble:

1. The Mega takeover. The Vodafone takeover of Mannesmann was the peak of dotcom mania. Will BHP Billiton’s bid for Rio Tinto prove likewise?
2. The FTSE takeover. In 2000, there were ten tech companies and eight telcos in the FTSE100. Today there’s a “similar concentration” of mining and oil groups and accounts for a third of the market cap of the index. A new name arrives to join them (possibly in the FTSE 100) next month – New World Resources. Remember Lastminute.com..?
3. Valuations. Mining companies, while not wildly expensive, are at the top end of their historical range while a bullish consensus prevails among analysts.

Regards,

Rob Mackrill
The Daily Reckoning

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GE’s stock dropped more than 11%, and was trading at $32.50 shortly after noon EDT.

At midday today in New York, all three of the key U.S. stock indices were down by more than 1%.

The blue-chip Dow Jones Industrial Average Index was down 146.31 points (-1.16%), trading at 12,435.67. Of the 30 stocks in the Dow, 26 were down. The tech-laden Nasdaq Composite Index fell do 2,318.89, a drop of 32.81 points, or 1.4%. And the broader Standard & Poor’s 500 Index skidded 15.08 points (-1.11%), to hit 1,345.47.

The S&P is down 2.1% for the week, as this morning’s sell-off extended the worst weekly decline in a month.

The transportation sector (up 0.14%) posted the only gain, while the conglomerates sector that GE is part of had the biggest decline, plunging 5.60%.

“We are seeing the collateral damage to the economy,” Bill Strazzullo, chief market strategist at financial advisory firm Bell Curve Trading, said in an interview with Bloomberg Television. “We saw this with retail sales, consumer confidence, now we are seeing this with the General Electric earnings. When you look at this from the vantage point on the effect of the broader economy, things are getting worse.”

GE – the world’s third-largest company by market value – reported a 6% decline in its first-quarter profit, due mostly to trouble in the financial divisions that are part of its massive GE Capital unit. Net income dropped to $4.3 billion, or 43 cents per share, while revenue increased 8% to $42.24 billion.

According to FactSet Research, the mean analyst expectation for profit from continuing operations was 51 cents per share. GE reported just 44 cents per share, which caused its shares to tumble.

In overseas markets earlier today, Japan’s Nikkei 225 Index surged 378.43 points to close at 13,323.73. Hong Kong’s blue-chip Hang Seng Index had a 480.69-point gain, and closed at 24,667.79.

European bourses were down, with the Paris-based CAC40, London’s FTSE 100, Madrid’s IBEX 35 and the Frankfurt-based DAX all posting losses.

At midday, the dollar had gained ground against the yen (up 0.216%), but lost ground against both the euro (down 0.449%) and the pound sterling (down 0.086%).

At midday in New York, the blue-chip Dow Jones Industrial Average Index was down 8.72 points (-0.07%), to trade at 12,617.31. The tech-laden Nasdaq Composite Index increased 6.72 points (0.28%), to reach 2,370.02. And the broader Standard & Poor’s 500 Index rose 3.29 points (0.24%), to hit 1,372.60.

The basic materials sector (up 1.68%) and the energy sector (up 1.10%) posted the biggest gains, while the consumer cyclical sector (down 1.01%) and the financial sector (down 0.46%) posted the largest declines.

Payrolls declined for the third straight month as U.S. employers shed 80,000 jobs, more than forecast, the Labor Department announced today (Friday). Unemployment increased in March to 5.1% from 4.8% last month and is now at its highest level since September 2005.

“After three consecutive months of job losses, it is hard to argue that we are not in a recession,” Joel Naroff, president and chief economist of Naroff Economic Advisors said today in a note to clients.

But market response to the news was subdued, as investors seem inclined to wait for first quarter earnings reports.

“The market is reacting well to what two months ago would have been disastrous news, but that may change after next week, when we get news from corporate America and what they think for the rest of the year – we may see some estimate guide-downs,” Art Hogan, chief market strategist at Jefferies & Co., told MarketWatch.

In overseas markets, Japan’s Nikkei Index shed 96.68 points to close at 13,293.22. Hong Kong’s blue-chip Hang Seng Index had a 392.20-point increase, to close at 24,264.63 on Thursday. The Hong Kong markets are closed today (Friday) for the Ching Ming Festival, a public holiday and will reopen on Monday.

European bourses were mostly flat with the Paris-based CAC40, London’s FTSE 100, Madrid’s IBEX 35 and the Frankfurt-based DAX all posting only slight gains.

At midday, the dollar had lost ground against the euro (down 0.540%), the yen (down 0.529%) and the pound sterling (down 0.015%).