The European Central Bank boosted interest rates to a seven year high of 4.25%. The Swedish Central Bank lifted its key rate to the same level, a 12 year high for that country. US job losses from the slump worsened with 62,000 going in May and another 52,000 being added from the previous month. And oil finished above $US143 a barrel in New York.

As a result, our market edged higher today, as did Asia where the gloom was palpable yesterday. Europe picked up from the US jobs figures as analysts said the loss of jobs (now 438,000 since January) means the US Federal Reserve won’t be boosting rates soon, even though inflation is rising.

Commodity prices eased, except for oil and really the Americans toddled off to their Independence Day long weekend in holiday mood, relieved the half day of trading hadn’t been interrupted by really bad news, and they didn’t have to come in on their holiday to protect their positions.

But they probably missed a small announcement from the Fed that sums up just how wasted financial markets are: the Fed is showing a $US1 billion-plus loss on the $US30 billion in Bear Stearns assets it took on in supporting JP Morgan’s rescue of the failed investment bank.

If the Fed had to sell the securities tomorrow they say the central bank would take a big loss, much like Citigroup, UBS, Merrill Lynch, have produced losses. But even then US analysts say the Fed’s valuation was optimistic because it assumes an orderly sale. In the current state of the markets, that’s not going to happen, so the losses could be much more than the $US1 billion.

The Fed said the Bear Stearns portfolio is currently worth $US28.89 billion, compared to the $US30 billion originally used in JPMorgan’s buyout of Bear Stearns.

And as investors look and wonder if there’s more selling to come, especially among Australian resource stocks (and those listed in London as well), they should consider this quote from the Lex column in the Financial Times, published a few hours ago.

Talking about the reappearance of the bear market, it said “In the anatomy of this bear, however, the cycle of earnings downgrades has barely begun. Globally, trailing earnings are down barely 5 per cent from a lofty peak — against the average historical slump of 25 per cent — and the damage remains concentrated in the beleaguered financial sector.”

And the overall earnings for shares are still being bolstered by higher returns for energy and some big resource companies (Rio and BHP). Industrial sectors like retailing, manufacturing and services could get very bloody for shareholders before the slowdown is finished.