The world remains on a knife-edge. After a period of relative calm following the bailout of Credit Suisse, the FTSE 100 has ended the week firmly in the red again amid another sharp sell-off in bank stocks.

Despite reassurances from, among others, the Bank of England governor and German chancellor Olaf Scholz about the relative strength of the financial system compared to the 2008 crash, financial markets are far from convinced.

As fears of contagion and further government and regulatory intervention linger, investors are hunting for the next weakest link. With its shares tumbling more than 15pc in early Friday trading and the cost of insuring its debts against default surging to a four-year high, the smart money is now on Deutsche Bank to be the next domino to fall. As of lunchtime, the markets were pricing in a 31pc likelihood of default probability on its unsecured bonds.

Even if the German giant has bags of liquidity to withstand a crunch, as some commentators have pointed out, the scary thing is it may not matter. As is often the case in banking crises, fears about Deutsche Bank could quickly become a self-fulfilling prophecy. On paper, Credit Suisse should never have needed rescuing but in the end, a loss of market and customer confidence effectively killed it.

Amid such a febrile atmosphere – and a longstanding cocktail of ruinous inflation, seemingly unending interest rate rises, and a fragile geopolitical situation – it may seem strange to talk about green shoots. Yet, they exist in increasing numbers, and if another financial meltdown can be averted – a big “if” admittedly – then the global economy could bounce back quite quickly.

As ever, it pays to look closely at what is happening in the business world where there are some tentative signs of a recovery, and pockets of cautious optimism.

Wetherspoons, in the hands of entrepreneurial chairman and majority shareholder Tim Martin, has suddenly come back to life after a brutal pandemic.

Story continues

Turnover is above pre-Covid levels and the pub chain has returned to profit, a strong sign that consumers at least aren’t allowing all the doom and gloom to dampen their enthusiasm for cutting loose. Martin’s comments about how he is looking forward to “ferocious” inflationary pressures easing are hugely reassuring too.

Elsewhere, DIY outfit Wickes has reported record sales and its boss David Wood has talked of a “bright” outlook, led by younger people spending money sprucing up their rental houses.

Sports Direct has rarely followed the crowd, and always has its eye out for a good deal, but when boss Michael Murray enthuses about hunting for targets in Europe, it is a sign that animal spirits remain alive.

Even Tui, the perennial sick man of the travel industry, is feeling more bullish. The company is trying to raise €1.8bn (£1.6bn), albeit through a heavily-discounted share sale. Still, it is further evidence that confidence in travel and tourism is on the cusp of returning from a long hiatus.

Business activity is proving remarkably resilient throughout Europe. UK output held up in March and costs fell to a two-year low. Growth in the eurozone is at a ten-month high as energy costs recede, and while protests rock France, its economy is expanding at the fastest rate since last May.

The latest trading figures from the high street, along with positive consumer confidence data, are further cause to be quietly upbeat. Sales are above expectations and consumers are spending across the spectrum, from luxury items to discount stores. Meanwhile, the mood among shoppers is at a one-year high. If inflation falls sharply later this year, as widely predicted, there could be a mini-spending boom that kickstarts growth.

Even Andrew Bailey, while continuing to pass the buck for sky-high prices, now regards Britain’s growth prospects as “considerably better” having repeatedly predicted a recession. Business leaders also talk privately at their relief at a more stable Government.

So there are plenty of grounds to believe that the sky is not about to fall in. The danger of course, is that any optimism is completely obliterated by a fresh panic about banking.

As Germany’s largest financial institution with around $1.4tr in assets, Deutsche is firmly in the “systemically important” category. There is enough reason to think it won’t be next. The bank comfortably meets all of the strict capital requirements that were imposed on the industry after the financial crash suggesting it has sufficient capital, liquidity and is adequately funded.

But the exact same could be said of Credit Suisse. Recent events have shown that once investors lose confidence, it is desperately difficult to regain. If the markets have already made up their mind about Deutsche, then any green shoots risk being squashed under a stampede for the exit.