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FTSE 100 climbs above 5000 level

The FTSE 100 climbed above the 5000 level hitting an 11 month high as investors become more confident about the UK economy and the ongoing corporate activity in the UK marketplace. The stock market is now just 200 points shy of the level attained just prior to the collapse of Lehman Brothers which was a significant turning point at the time. Does this mean the UK economy is now over the worst?

While there is no doubt that ongoing economic data would suggest that the UK economy has turned and is now potentially in positive ground there are still some concerns in the background. Even though the property market has shown a slight increase in prices over the last few months not everybody is convinced that the worst is over. One of the potential dangers now is a return to the boom and bust scenario where confidence grows and consumers and businesses overextend themselves in the short to medium term.

There is also the real threat of inflation, which until recently has been in negative territory, pushing ahead as and when the UK economy officially moves out of recession. Despite the British Chambers of Commerce calling for a further reduction in UK base rates this would appear to be out of the question at the moment as it would fuel the fire of inflation.

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