Wednesday, May 17, 2006

Surprise acceleration in US core inflation sends FTSE tumbling

New bout of inflation jitters hits markets

FTSE down 2.9 on the day. Sharpest falls in European equities in three years.

Posted by denzil @ 10:09 PM (641 views)
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11 thoughts on “Surprise acceleration in US core inflation sends FTSE tumbling

  • Get your stocks out of the US, quickly.

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  • Bu99er. There goes the investments and savings for some of my deposit ! Should have stuck them under the mattress again.

    Why should the UK and European stocks drop so much on US inflationary fears? Is this because the FTSE is full of multinationals – and this is a global issue now ?

    Apparently the ECB could raise its interest rates by 0.5% in June and the BoE by 0.25% in either June or later in the Summer. The Fed is highly likely to raise interest rates in June also.

    Unfortunately the economy (on paper anyway) is in excellent shape, debt does not matter and unemployment is low (compared with Europe – and the recent losses in manufacturing is negligable as we had so little of it anyway – selling things you have made is not as important as selling things other people have made or selling “services”)

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  • Sirgoogle

    Two things to remember.

    1/ The economy ( and US ) is in good shape on borrowed money and un-sustainable. any econmy can look really good if you throw enough money at it, problem is having money thats your own!
    2/ The people that lend money ( the big boys ) have lent xxxxxxx Trillion dollars out and as greed does want massive returns for it, for them the higher interest rates go the better

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  • Bull markets tend to experience periodic retrenchmants – this one has gone a long time without one, which is probably why it’s looking a bit savage.

    No-one is arguing that shares are over valued, or that companies are producing poor results, and the people who are pointing to the possibility of further US interest rate rises are not identifying anything of note that wasn’t already expected and priced in.

    I have a strong suspicion that this downturn was kicked off deliberately by one or two powerful players, after positioning themselves to profit from it.

    Personally, I’m keeping my nerve and betting on a full rebound.

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  • So what is the inflation rate in the US?

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  • Autopilotengage says:

    I’m with Tom on this one, it’s a temporary shock. Good time to buy i’d say.

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  • Well….. This correction has been on the cards for a while and I myself have been waiting for it to happen. If you have been watching the dollar decline rapidly over the last few weeks, it was a sure sign that things were about to get a bit choppy. You have to remember that we are actually in a secular bear market at the moment which started in March 2000. We have had a bull run for 3 years in this secular bear market and since around the end of October market volatility levels have droped to less then 4 days per month of a 1 % drop in markets. Complacency has set in, the sit and wait strategy of buying stocks that worked from 1982 – 2000 will not work from 2000 – 20xx. The inflation data that has jittered the markets was not a major shock event like 9/11 or 7/7, but inflation is back and that can have a longer affect on the world then shock events, Gold, Oil and other commodities have been showing the signs of inflations for a few years and it has now started to filter through at the consumer level. This is not over so hold onto your hats boys and girls, its going to be one hell of a ride.

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  • Bhuvar – good point well made. Sir Google where have you been for the last 20 years if you don’t understand the importance of the US economy on the rest of the world? Sell you shares, short the dollar and western stock markets and buy gold! Oh and if debt doesn’t matter can you lend us a tenner.

    http://www.brokebroker.blogspot.com

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  • >>I’m with Tom on this one, it’s a temporary shock. Good time to buy i’d say.

    I’d probably hold back 2 or 3 weeks before making any decision.

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  • Tyrellcorporation says:

    I bought some stock in the ‘suckers rally’ proceeding the Tech-bust. I’m gonna sit this one out and see where it goes…

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  • European-bear says:

    Rather put my money into shares at the moment than the UK property market. Reckon its less risky!

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