Stock markets concerned about immediate future of UK economy
The reaction to the 1.5% base rate reduction has been very mixed in the UK financial world with some investors happy to see the rate falls to the lowest for more than 50 years and others more concerned about the underlying reasons for the surprise drop. In many ways the surprise 1.5% fall has caused more concern than it has given comfort to markets around the world and in the UK. If the UK economy is in such a bad way then surely other areas of Europe will be struggling and some could actually be worse?
While a revolutionary move from the Bank of England was demanded by many nobody expected a rate cut the size that we saw on Thursday and something which is so out of sync with the historic trends at the Bank of England. Investors and experts will be keeping a close eye on economic data due out over the coming weeks looking for specific reasons as to why the bank reacted as it did on Thursday. If the immediate economic data flow is no worse than expected then we are likely to see a positive reaction in the stock market but at the moment there is a real lack of conviction amongst investors and a greater level of uncertainty about the short to medium term future of the UK.
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