UK

18/11/2008

October was another extremely punishing month for UK and global equities. A rally in the last few days managed to marginally lessen the blow, but the FTSE All-Share still suffered huge losses. Sentiment was initially weak on continued fears about systemic collapse despite the passing of the US rescue package. As a result, the authorities intervened with co-ordinated global interest rate cuts, whilst the UK announced its own £50 billion banking rescue plan. A seemingly clever and sensible solution, this plan was then emulated across Europe and, to some extent, in the US as well.

In the meantime, however, worries were escalating about a deeper and more global economic slowdown and markets were then forced to face some potentially very significant second-round effects as the emerging economies came under increasing pressure. This, together with the impact of much lower oil prices, caused a sharp jump in the value of the US dollar, which, in turn, prompted a further wave of de-leveraging. It was only in the final days of October that markets started to recover some ground as interest rates looked set to come down materially around the world.

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