DO BANK share prices matter? And to the extent that they do, are they now signalling a recession ahead?

The crisis that has gripped the financial sector in recent weeks has centred on a collapse of confidence in financial products, starting with US subprime mortgage loans and spreading out across the much larger market in asset backed commercial paper. While dealings in this market tend to be undertaken at one remove from the retail banks, giants such as HBOS, Barclays and Royal Bank of Scotland are seen as the most exposed to this flight of confidence and for the debt as it ultimately falls due.

This is why the banking sector of the London stock market has been so badly affected by the turbulence of the past few weeks. There are now signs of some recovery but few are convinced that we have seen the end of this crisis. These concerns are of particular interest to the financial sector in Scotland as it has come to be dominated by two large banks - Royal Bank of Scotland and HBOS. Shares in these companies are down by 20 per cent and 24 per cent respectively from their high points just a few months ago.

There are three ways in which the liquidity crisis in the banking sector could transmit a slowdown in the wider economy.

The first and most immediate is through a sharp fall in corporate mergers and acquisitions. The second conduit is through the adoption by the banks of tighter lending criteria, both for business borrowers and for households. And the third transmission mechanism is the effect on business and household confidence.

Financial sector retrenchment is likely to come in banking and corporate advisory work and to a lesser extent in fund management. And as this has been the fastest sector of the economy in Scotland, the repercussions could soon be felt. Markets will continue to be watched with apprehension.

For this we can thank those who recklessly - or mischievously - chose to revive the European Constitution after rejection by the French and Dutch people, when common sense urged Brussels to lie low, lick its wounds, and rediscover patience.

By reopening this can of worms, they have already let France's Nicolas Sarkozy excise the clause "free and undistorted competition" from the core objectives of the Union. Adieu to the single market, the one incontrovertible benefit of EU membership.

It would never have been easy to win a British referendum on the original (better) text, which furnishes the EU with the apparatus of a thrusting state - president, foreign minister, justice department, supreme court, energy tsar, and treaty-making powers. It will be much harder now.

Gordon Brown's plan to slip it through Parliament is becoming untenable in the face of a backbench revolt by Labour MPs, a united Tory opposition, and likely calls for a vote by the Liberal Democrats. As David Blunkett said last week, Downing Street has failed to justify why Labour is violating its manifesto pledge to hold a referendum. "It is critical for the Government to demonstrate the difference between the original constitutional treaty and the current treaty," he said.

Well, yes, and how is this to be done when Valery Giscard d'Estaing, the author, himself says the changes are "more cosmetic than real", that "the substance is similar or even the same," and that the label constitution has been dropped to "make a few people happy"?

Should Gordon Brown persist with this charade, he will be chased out of Downing Street within two years.

Where all this might end is anybody's guess, but it is a fair assumption that Mr Sarkozy will quickly press for a core-Europe, one more willing to entertain his plans for "Community Preference" (a semi-closed trade bloc), a managed exchange rate, and perhaps capital controls - as allowed by majority vote under Article 59. By then, the French, Spanish, Greek, and Italian housing booms will have popped, so the mood will be receptive.

What we take for granted as the permanent post-War order is more fragile than it looks. Tug too hard on the British thread, and the European system quickly starts to unravel. Jean Monnet would have seen the dangers of this. Germany's Angela Merkel does not. The provincial and ill-advised Kanzlerin has over-played a tactical hand, heedless of strategic risk. The die is caste.

US President George Bush has made an unannounced visit to Iraq on the day British troops completed their pull out of Basra. Iraqis are celebrating the move as a defeat, but Gordon Brown insisted Britain could still intervene in Basra when necessary. The American response to the pull out has so far been muted, despite its crucial timing.

Bush administration officials were reportedly furious that the operation was launched at a time when the president is begging for more time for his "surge" strategy to turn the tide of the war - though no official comment has yet been made. The MoD dismissed claims that the Americans had been left out of the loop.

The decision to hand the palace to Iraqi authorities was taken with the backing of the US and other coalition forces and in consultation with the Iraqi government, said a spokesman. Downing Street refused to say if Mr Brown had discussed the withdrawal with President George Bush but a spokesman said the Prime Minister was in "close contact" with the White House.

With 145 mph winds, Felix headed west, according to the U.S. National Hurricane Center, which warned the "extremely dangerous" storm could strengthen before it reaches the Honduran coast on Tuesday and then slams into Belize, where many residents were still cleaning up from last month's Hurricane Dean.

Some 300 tourists were evacuated from Honduras' islands by midday Monday, and 400 others were awaiting flights, said Armando Funez, a spokesman for the country's National Airline Association. Winds and surf were picking up, with some waves crashing 15 feet higher than normal.

THIS IS A BREAKING NEWS UPDATE.

ORANJESTAD, Aruba (AP) -- Hurricane Felix rapidly strengthened into a dangerous Category 5 storm and churned on Monday toward Central America, where forecasters said it could arrive as a "potentially catastrophic" storm. Tourists jammed the airports seeking flights out.

Felix was packing winds of up to 165 mph as it headed west, according to the U.S. National Hurricane Center. It could hit Honduras' coastline on Tuesday before slamming into Belize, where many residents were still cleaning up from last month's Hurricane Dean.

The 550 soldiers have handed Basra Palace over to Iraqi control and joined 5,000 troops at the UK's last base, near the airport, outside the city. The Ministry of Defence said the handover of Basra province was now due in the autumn. The prime minister said the withdrawal was "pre-planned and organised" and UK forces would take an "overwatch" role.

This will mean troops cannot go out unless requested by Iraqi authorities, but they will still train and mentor Iraqi security forces. The PM told the BBC's Today programme that the number of British troops in Iraq would remain roughly the same, and that they could "re-intervene" if necessary.

Iranian President Mahmoud Ahmadinejad made the announcement on state media. His claim has met with scepticism at the UN.

Western powers accuse Iran of seeking to build nuclear weapons - a charge Iran denies. There's particular concern about progress in Tehran's uranium enrichment programme because the process can be used to make fuel for power plants or material for bombs.

Iran says it wants to master nuclear technology so it can generate electricity and save its oil and gas resources for exports.

Until now, Tasers - which emit a 50,000-volt electric shock - have been used only by specialist officers as a "non lethal" alternative to firearms. However, they can now be used against all potentially violent offenders even if they are unarmed.

Tasers work by firing metal barbs into the skin which then discharge an electrical charge which is designed to disable someone long enough to allow police to detain them safely.

Amnesty International claims Tasers have been responsible for 220 deaths in America since 2001. Many cities and police forces there have banned their use against minors.

Taser International, the American firm that makes the device, said tests on pigs suggested the weapons were safe. The Association of Chief Police Officers, which issues guidance to forces on the use of weapons, said Tasers would be made "readily available" for "conflict management" at incidents of "violence and threats of violence of such severity that they will need force".

Non-firearms officers in ten forces will be trained to use the weapons. Every incident they are involved in will be assessed over a 12-month trial period.

The first hurricane of the season, Dean, turned into a monster Category 5 storm and killed at least 27 people as it roared across the Caribbean and Mexico late last month.

Figures show there were about 1,300 incidents of criminal damage and arson, and more than 60 sex offences committed by under-10s in England and Wales. If a child is nine or under, he or she can not be charged with an offence in England and Wales, though the crime will be recorded by the police.

Of the 2,840 crimes where the suspect was under 10, around half were cases of arson or criminal damage. There were also 66 sexual offences, including a number of sexual assaults on children under 13.

Lawrence Lee, who was solicitor for Jon Venables, one of two 10-year-olds who murdered James Bulger in 1993, said lowering the age would send an important message to child offenders. He added: "As a defence lawyer I would say no, it wouldn't be a good thing.

"But if I wear my citizen's hat, I would say if you go along to any estate and see the age of kids marauding around like a pack of wolves, you'd see that reducing the age of criminal responsibility to eight or nine would be vital."

The former chief of the general staff said the approach taken by Donald Rumsfeld, the then US defence secretary, was "intellectually bankrupt", describing his claim that US forces "don't do nation-building" as "nonsensical". Sir Mike's comments - made in his forthcoming autobiography Soldier, serialised exclusively in The Daily Telegraph - represent the most outspoken criticism of American military policy in Iraq to come from a senior British officer.

His attack - the first time he has revealed the depth of his anger towards the US administration - highlights the deep-seated tension between the British command and the Pentagon during the build-up to and the aftermath of the Iraq campaign in 2003. Sir Mike, who took command of the British Army one month before US-led forces invaded Iraq, said Mr Rumsfeld was "one of those most responsible for the current situation in Iraq".

Crucially, the general writes, he refused to deploy enough troops to maintain law and order after the collapse of Saddam's regime, and discarded detailed plans for the post-conflict administration of Iraq that had been drawn up by the US State Department.

In the book, Sir Mike says he believes the entire US approach to tackling global terrorism is "inadequate" because it relies too heavily on military power at the expense of nation-building and diplomacy. His outspoken remarks are likely to increase tensions between the British and US military over policy in Iraq.

The larger part of the impact on business investment comes through over a two to three year period. It takes longer in the case of consumer spending". This would equate to about 2 per cent of GDP, a significant hit, with an implied reduction of around the same magnitude in Government revenues, or approximately £10bn per year by the end of the timescale.

Even if share markets recover swiftly, the continuing crisis in credit markets is a potentially larger source of disruption. In the medium term there is the unknowable impact of lay-offs, financial losses relating to sub-prime lending, a general depression in earnings in the financial sector and the cost to the Bank of England of any losses it suffers as a result of lending to banks.

Financial services account for some 8.3 per cent of the GDP, very roughly £100bn, so any reduction in the health of the sector would have serious repercussions for the UK economy as a whole, and especially for London and the South-east.

Philip Shaw of Investec Securities comments: "A large shake-out of the UK financial services sector could have a noticeable effect on the economy. Given the fast pace of growth in this area recently (10.4 per cent in the year to the second quarter of 2007), it has contributed over a quarter of the 3.0 per cent increase in GDP this year. If this key driver is taken away, the effects on growth will be very visible. In the last downturn, corporation tax paid by the financial sector fell by 30 per cent between 2000/01 and 2003/04."

Mr Moi's regime, which came to an end in 2002, has long been regarded as one of Africa's most corrupt, but the extent of the graft has never been exposed in so much detail. The 110-page report by international risk consultants Kroll details assets still allegedly owned by the Moi family and their entourage in 28 countries, including hotels and residences in South Africa and the United States, a 10,000-hectare ranch in Australia, three hotels in London, a £4 million house in Surrey, and a £2 million penthouse flat in Knightsbridge.

The report, delivered to the Kenyan government in April 2004, alleges a level of corruption that would place ex-President Moi's regime on a par with the kleptocratic rule of Zaire's Mobutu Sese Seko, Sami Abacha of Nigera and Ferdinand Marcos of the Philippines.

It claims the Moi family laundered $400 million through a complex web of accounts in Kenya, Geneva and Frankfurt. It also alleged that they and a handful of associates own a bank in Belgium that was used to launder money from Kenya and uncovered a web of secret bank accounts, shell companies and dummy trusts registered in tax havens, including the Cayman Islands. Moi's sons, Philip and Gideon, were reported to be worth £384m and £550m respectively.

The Atlantic lows which have dogged the British Isles almost continuously for the past three months, giving us our monsoon summer, are likely to give way now to many more settled periods of high pressure, according to the Met Office's autumn forecast, issued last week. Rainfall and windy weather are likely to be below average, and in the still, calm conditions, fog is more likely to form, especially after the autumn equinox of 21 September when nights become longer than days - and so chillier.

"There will be a greater risk of fog, compared to normal, during the latter part of autumn," said the chief forecaster, Nick Graham. "As the nights get longer and colder it may cause more impact, as it is likely to linger longer during the morning."

The king's call comes as the Fatah and Hamas movements remain deeply divided, both physically in their respective strongholds of the West Bank and Gaza Strip and ideologically in their approach toward Israel.

"We call upon all our Palestinian brothers to let sound judgment and reason prevail," Abdullah said in an interview with Jordanian television. "The separation of Gaza from the West Bank is unacceptable at both the Palestinian and Arab levels."

The violent seizure of the Gaza Strip by Hamas in June has created dueling Palestinian governments, with Hamas ruling the Gaza Strip and loyalists of Palestinian Authority Chairman Mahmoud Abbas in charge in the West Bank. Hamas opposes Israel's existence, while Abbas seeks a political accommodation.

Abullah held out high hopes for an international Mideast peace conference called for by US President George W. Bush and scheduled to take place in November. He said the meeting would be a "significant opportunity to resolve the core conflict in the region between Israelis and Palestinians in accordance with international resolutions and the Arab peace initiative."

The peace plan referred to by the king envisions full Arab recognition of Israel in exchange for lands it captured in the 1967 Six-Day War.

A boy wept in court yesterday as he was convicted of killing a man when he was only ten. The child, now 12, was part of a gang who stoned a father-of-two to death as he played cricket with his son. The 4ft-tall youngster was three months short of his 11th birthday when he and his friends launched a barrage of sticks and stones at retired draughtsman Ernest Norton, 67, in February last year.

A half-brick hit Mr Norton on the side of the head, fracturing his cheekbone, and he collapsed with a fatal heart attack. Five of his attackers - none of them more than 13 at the time - were found guilty at the Old Bailey of manslaughter and violent disorder.

The verdicts shattered the show of bravado they had put on through the month-long trial. Minutes earlier, they and their families had looked relaxed in the corridors of the criminal court, with the boys playing card games and swopping sweets. But as the jury foremen read out the verdicts, the youngsters burst into tears and clung to the parents sitting with them in the dock.

Judge Warwick McKinnon indicated that they faced an "inevitable" custodial sentence but allowed them to go home on bail until sentencing on October 19.

The boys, from Erith, Kent, were in a gang called TNE (The New Estate), who had planned a fight with rival gangs on the day of Mr Norton's death. As they wandered around the town they saw Mr Norton and his son James, then 17, playing a makeshift game of cricket in the tennis court of Erith Leisure Centre. The gang began shouting insults, calling the teenager a "rubbish bowler" and telling Mr Norton, "Go back to your old people's home". But they turned to violence when Mr Norton told them to go away.