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UK stock market takes lead from upbeat economic data

In the first trading day of the New Year, the UK stock market ended up an impressive 1.62% with investors taking note of economic data regarding growth in the manufacturing sector. Even though there had been hopes of a recovery in UK economy in the early part of 2010, the better-than-expected manufacturing figures caught many analysts and investors on the hop. So what next for the UK stock market?

Historically the markets tend to be a little more buoyant in the first few days of the New Year and this year would appear to be no different. We should also start to see retail sales data from the major retailers in the UK which should hopefully confirm hopes that retail sales were better-than-expected over the festive period. However, we also have the VAT issue to contend with VAT returning to its traditional level of 17.5% against the reduced level of 15% brought in by the government. Without doubt an increase of 2.5% in VAT will take more money out of the pockets of consumers and reduce profitability for retailers.

Whether the increase in VAT will be offset by a general increase in the UK economy remains to be seen but so far so good.

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