Closing Market Comments 4th December 2008
Going into the last few minutes of trading, UK shares look to be shaking off a mid-session wobble to finish broadly flat on the day.
Initially, today's announcement by the Bank of England that it was cutting the base rate to a 57-year low of 2% sparked a sell-off for share prices, but a steady open on Wall Street has seen the market recover some of this slide. The move by the Bank and the volatile reaction by investors is a fair representation of the uncertainty that still dogs markets. On the one hand low rates are perceived as a good thing; but the fact that central banks have decided to cut so severely in recent weeks is a demonstration of the severity of the situation – and betrays concerns that it is going to get worse.
With further negative news out today on house prices and sterling taking another tumble early on against the US dollar, it would be naïve to think that today's move is going to turn the economic situation around any time soon. While some were calling for an even bigger cut in rates, on balance it looks sensible that the Bank of England have kept something in reserve for next year because at the moment it continues to look like the economy is going to need it.
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