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Published On: Fri, May 31st, 2013

FTSE falls but UK economy showing positive signs

The FTSE 100 closed this evening with a decline for the second week in a row, something that it has not happened since November of 2012. Analysts are split when it comes to how severe the FTSE’s recent run actually is, with some saying it’s a “short term pull back”, while others feel this is the beginning of a long term process of correction.

Much has been made of Ben Bernanke’s recent comments and they will continue to play on the minds of investors until they are given a more definitive answer regarding the Federal Reserve’s monetary easing policy — one way or another. When and where that reassurance comes from nobody yet knows but with the speculation ongoing, US Treasuries have increased by 48 base points this month on the back of investors concerns and their search for safer assets.

Should this trend continue we will inevitably see a rise in interest rates but Xavier Lagrandie of Lombard Odier Investment Managers offered Bloomberg his views on the situation, saying “It’s understandable that at some point interest rates go up a bit, but rates are still extremely low… We’ve seen an economic recovery in the U.S., which supports global growth, although Europe continues to lag behind.”

While Mr Lagrandie is absolutely correct, it would be foolish to downplay the progressive steps that the UK economy has made over the last 6 months and beyond; progression that was backed up by the British Chamber of Commerce today. The BCC announced that they had amended their forecasts for the UK’s GDP over the next 3 years, stating that they expected the Gross Domestic Product to increase by 0.9% this year, 1.9% next year and 2.4% in 2015; rises of 0.3%, 0.2% and 0.2% respectively.

Unfortunately, with the negatives being near-term and positives being long term, the FTSE still registered a decline for its second consecutive week — regardless of the fact that it simultaneously registered its longest run of consecutive months of advances in the index’s history.

The FTSE closed down 1.11% for the day as it saw the week end at 6583.09, down from 6762.01 at the start of the week’s trading on Tuesday.

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About the Author

- Gregory previously worked for a leading financial news publication and is now assistant news editor of financialtrading.com.

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