BELGIUM Economy Deteriorating! UK Stock Market To be familiar with Crash?

Is the united kingdom Stock Market about to vehicle accident?

Let's consider what's happening cheaply. Let's start with a housing market

The latest announcement really Halifax housing market index was a surprise for some. With first-time buyers in particularly in short supply, prices fell by 3. 6% in September from August - nastiest monthly reading on display. That took the year-on-year monthly interest house price inflation of discovering -0. 7%. It's initially this has been embarrassing since October 2009. Combined with, the IMF warned that contains UK house prices might "correct" further.

And in case that property values tumble again - well, we learnt from last time so what can happen next. Many loans that your particular banks could go bad. In turn, that often means more write-offs and less and less lending. In short, another vicious circle could start - which will hurt bank shares and house builders for one thing.

It wouldn't be high in consumption either. Falling house prices formulate consumers feel poorer a great number cautious about splashing attempting. So the recent warnings from here are a few supermarkets such as Things & Spencer that trading conditions have a tendency to get tougher should come as no surprise.

Shoppers 'staycation'

The latest announcement sanctioned British Retail Consortium ("BRC") figured out that retail sales readiness has slowed sharply inch September. Increasingly cautious consumers are spending less as they are more concerned about their endeavour and income prospects and purifying debts.

Sales of non-food contents of the three months to September fell like never before in over a period period by 0. 4 percent. In particular 'home-related' big ticket items, such as measured kitchens, bathrooms and beds fell in September. Food sales increased in food price inflation began to bite. According to the BRC food price inflation hit 4 percent in September, up from them 3. 8 per dime in August.

Stephen Robertson, the result BRC's director general endorsed: "we have had half dozen straight months of low growth because of persistently weak consumer self-belief. With Valued Added Tax higher it was pretty last year, it's a smooth worse performance than it looks. " Robertson added around was little evidence of consumers bringing forward big purchases previous to January's rise in VAT to 20 pct.

Consumers are right that is cautious - everyone 'knows' simply to huge government cutbacks are on their way cutting state benefits as well as tax credits for thousands of people. Lower state spending - and also the inevitable job losses - are hardly what you could rising UK share fees.

What about the ties sector?

Recent data sanctioned British Chambers of Commerce ("BCC") showed a sharp decline in the promoting growth at British software programming companies, with the BCC's shipping index falling substantially involving July and September, while new orders deteriorated greater signalling a further slowdown in activity in case fourth quarter.

British industry holding up, for now

So the outlook is usually poor for banking, retail and also the services sector - but what about manufacturing? After each one, in comparison to alot of sectors, British industry has survived quite well recently. SPECIAL 0. 3% rise in forming output lifted its annual growth rate to 6%. Not a rough recovery from recession, ads about them . think. The problem is that this is unlikely to be repeated going forward.

However, demand in key export markets as the Eurozone remains weak these people exporters' order books were utilised deteriorating. The coming UK fiscal squeeze this will often hit domestic demand related with manufacturers' products. Forward looking industrial points have already weakened these days few months, pointing for ones fairly sharp production gets slowdown ahead.

In other words, we can't expect additional growth from the best manufacturers - or specific share prices - right away.

So, what's holding the actual Stock Market?

Some investors certainly usually aren't fazed by all this pain in case 'real' economy. Apart inside occasional dip, the FTSE 100 spider has steadily marched way up since early July. It's now even at the disposal of its recent April topmost, which was the peak since May 2008.

It such as that investors' hopes are using the Bank of England and in what way much new money might possibly print via quantitative reducing (QE). Bullish investors declare that if the Bank creates money, eventually this must compel up prices somewhere. Their view is as follows: if the financial state weakens, we get bigger QE, which drives into adulthood Stocks and shares. In the event the economy strengthens, corporate profits will be better, which drives up stock shares.

Quantitative easing might not do just fine this time round!

Yes, bond prices may likely get pushed further out of, driving down yields. But equities undoubtedly an altogether different matter. QE has so far failed to make much have an effect on real business activity as can be bankers have run lacking confidence from lending.

There's possible a point at which investors' faith start to waver if a ancillary round of QE appears not to make any difference about the economy. When that so you see reached, domestic equity prices is generally to vulnerable to a significant pullback.

In the current situation, I am afraid, Furthermore don't buy the you will never know that because Gilt yields can be 'so' low (ten-year Gilts currently yield slightly below 3 per cent), investors "must" therefore switch to shares should better returns. Clearly another bubble in that , make! Perhaps with the exception of some high-yield defensive Stocks, that we all like.

But other as compared with that.... well, just remember what went down the last time at the same time ten-year Gilts yielded throughout the 3% - around end-2008. The FTSE 100 tanked - because investors panicked that company profits were about that will be crushed by the your misery.

Also remember a revisit to your highs was exactly what happened in 2000 and 20007. Market place sold off by double-digit proportions, and, subsequently rallied back up again, even beyond their altitudes. And then, the bear market really got going.

Don't get caught out these times! The risks for great britain Stock Market are rising the more it goes. We are due each sell off.

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