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Mervyn delivers disappointing domestic outlook

Major news of the day came in the form of a quarterly inflation report from the Bank of England. The announcement from Bank Governor didn’t make for comfortable viewing, with 2011 and 2012 UK growth forecasts reduced to around 1%. The decline in sentiment following the eurozone debt crisis and global growth fears was said to have worsened since August, and could lead to a stagnation of the UK economy until mid 2012. The negative prognosis left the door open for further stimulus, possibly adding to the £275 billion worth of quantitative easing already in place, with most economists now predicting an additional £50 billion of asset purchases early in the new year.

The above announcement came along side UK employment data that showed unemployment rose to 2.62 million in the third quarter as 129,000 more people were out of work. It equated to an unemployment rate of 8.3%, the highest since 1996. The impact of the announcement was felt in fixed income and currency markets, Sterling lower against the majority of trading pairs. The FTSE lost its early gains and failed to break above yesterday’s closing price of 5519. Vodofone, BSkyB and Marks & Spencer were amongst the biggest fallers on the index as their shares went ex-dividend.

Italian and Spanish bond yields remained elevated despite scenes of the Swearing in ceremony for the new Italian Government. The FTSE finished the day down a mere 8.4 points, a 0.15% loss that saw it close at 5509.

This was posted in Bdaily's Members' News section by John Dance .