UK Recession Imminent

Posted by Rob

October 10, 2008

With the much publicised bail-out of UK banks by the Government, it looks more-and-more likely that the UK will hit a dictionary definition of a recession.

“The growing perception that the UK is struggling more than many eurozone nations, given its greater exposure to weakness in equity and credit markets, is undermining sterling. Since July 2007 the pound has fallen by 15 per cent on a trade-weighted basis.” - FT.com

The eurozone appears to be struggling, but the UK seems to be under intense pressure in comparison to some of its neighbours. Bad news was increased with the fall of Icelandic banks and the governments promise to cover losses for 1000s of private savers.

Meanwhile the global financial crisis continues with the DJIA falling over 600 points after the NYSE opened this morning. This took the Dow Jones to below the 8000 mark for the first time in over five years.

Despite decisive action by the UK and the US, global markets continue to falter as confidence is at an all time low, if not a panic.

“Despite the innovative and, in our view, comprehensive actions taken by the UK government and central banks, the sell-off in equity markets continues apace as relief in pricings of various credit and money markets have failed to materialise,” says Robert Quinn, equity strategist at Standard & Poor’s in London. - WSJ.com

Technical Chart: 5-day FTSE100 vs Dow Jones

FTSE 100 vs Dow Jones 5-day (10-10-08)

From the above 5-day chart comparing the FTSE 100 against the Dow Jones Industrial Average, we can see the huge fall in only five days. We can see that both the FTSE 100 and the DJIA have fallen in the region of 15-20% in the last five days. Both INdexes have recovered slightly today, but confidence in the market remains pessimistic despite Government bail-outs, benchmark interest rate cuts and billions of dollars and pounds being put into the system.

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