ASIAN STOCK markets roared back to life yesterday following the unexpected cut in United States interest rates announced on Thursday. Stephen Lewis, chief economist at Monument Derivatives said: "The markets are apprehensive that the Fed's move will turn out to be pre-emptive, ahead of the publication in the days ahead of some major problem in a hedge fund or bank".Carl Weinberg, chief economist at High Frequency Economics, said: "Our theory is that something awful is about to happen in Japan. The pound approached DM2.74 at one point yesterday, a drop of over 2 pfennigs, before regaining ground to close down 0.5 pfennigs at DM2.7624.London stocks initially responded well to the surprise decision of the US Federal Reserve to lower two key interest rates in advance of its next scheduled interest rate meeting.The FTSE 100 hit a high of 5208.1, up 151.8 points, in early trade after the Fed cut both its funds rate and its discount rate by 0.25 percentage points citing "growing caution by lenders and unsettled conditions in the financial markets".However, the index fell back in afternoon trade on speculation that the Fed's move was prompted by worries over the financial health of a hedge fund or a bank. MPC meetings - which have to be held "at least once a month", according to the Act - require a quorum of six of the nine-strong committee to be present.The meetings can, if necessary, be conducted over the telephone. A spokeswoman for the Bank of England said: "No emergency MPC meeting has been called today [Friday]." However, the Bank added there was "nothing to stop" the MPC meeting "as and when they like", prompting dealers to speculate there could still be a rate cut before November 5, the date when the MPC is next scheduled to make a rate announcement . Under the terms of the Bank of England Act, Eddie George, Bank governor, may call an MPC meeting "at any time on giving such notice as in his judgement the circumstances may require". UBS last night refused to comment on reports that it had liquidated $250m of bonds held as collateral after Ellington allegedly missed a margin call this week. Ellington is run by former Kidder Peabody trader Michael Vranos out of Greenwich Connecticut where Long-Term Capital Management is based. Mr Vranos has told investors that it is liquidating some of its bond portfolio in order to reduce borrowings and stay in business..

THE BANK of England was yesterday forced to deny rumours that an announcement about further UK interest rate cuts was imminent, amid mounting speculation of a reduction in rates in advance of the next scheduled Monetary Policy Committee (MPC) meeting. The rumours were triggered by Thursday's unusual decision by the US Federal Reserve to cut US rates prior to its regular meeting. I used to stay away from that kind of thing but I realise that's the way things are done."Elizabeth Nash. UBS, the Swiss bank whose chairman quit two weeks ago over losses arising from a $1bn investment in Long-Term Capital Management, is believed to have major exposure to Ellington, a $1bn hedge fund that has been severely hit by this week's fall in values of US-mortgage based bonds. At her flat, in a modest part of town, she ploughs through paperwork and proposals for local authority dance grants.On Friday we meet in the Axarquia club. By 1am the place is packed with exotically dressed, coiffed and made-up women with roly-poly blokes wearing white socks and moccasins and carrying mobile phones. They bounce and flounce through sevillanas with casual beauty and much laughter.Clara says: "I've spent three nights visiting theatres checking out dancers, catching up with producers and you end up yakking all night.

"We start at midnight and then after the show have a few beers and go out and meet old friends and you don't get to bed until dawn. The worst thing is by the time you wake up, you've missed the bank, the supermarket ..."This week, however, marked a lull in her performing schedule. She has small studio off the street in Madrid's scruffy old quarter: flamenco's heartland, she assures me. A thunderous hammering of heels comes from the cellar where a woman, humming her own accompaniment, is perfecting a dance routine in an even tinier space.Clara, 42, started ballet training at five, studied folk, jazz and contemporary dance, and took her first flamenco lesson at 19. She became hooked on the dance and her teacher, Ramon de los Reyes, whom she married Flamenco today is too percussive, she says "It's become too angry and stamping Take your eyes off the dancer and you don't miss a thing You only need to hear it It leaves you empty. Where are the lovely arm movements? No one cares about the lovely line, the passion.