spending cuts and effect on markets
Discussion
I'm sure it was 'the city' telling the Government to make the cuts to reduce the deficit so they've got what they wanted?
Also the markets are an indication of what the traders are thinking the future will be like. You could take this as an indication that they're thinking there are rosier times ahead, or that the cuts are "not as bad as suspected" this seems to be the phrase whichever city-boy talking-head the relevant news program has wheeled in front of the camera seems to use to explain this sort of thing.
For an indication of what the world thinks of UK Plc you have to look at the currency markets and the £ is falling fast today.
Also the markets are an indication of what the traders are thinking the future will be like. You could take this as an indication that they're thinking there are rosier times ahead, or that the cuts are "not as bad as suspected" this seems to be the phrase whichever city-boy talking-head the relevant news program has wheeled in front of the camera seems to use to explain this sort of thing.
For an indication of what the world thinks of UK Plc you have to look at the currency markets and the £ is falling fast today.
It is very strange. Surely if half a million public sector redundancies (effectively) have just been announced, that can't be good no matter where you sit. Even if the city wanted cuts, growth simply has to suffer. We have risen 400pt in the last 6 weeks or so. There is something not right there for sure.
Blown2CV said:
It is very strange. Surely if half a million public sector redundancies (effectively) have just been announced, that can't be good no matter where you sit. Even if the city wanted cuts, growth simply has to suffer. We have risen 400pt in the last 6 weeks or so. There is something not right there for sure.
For those most part the cuts are already factored into market prices. Plus a very large percentage of the revenues achieved by FTSE 100 companies are from overseas with a notable amount from emerging economies, which aren't affected by our cuts.ShadownINja said:
matsmith said:
ShadownINja said:
The markets can stay solvent longer than you can stay irrational.
oi! cheeky bugger rearranging my wise sage like advice from the other thread 
woops! many apologies good sir! marsred said:
Blown2CV said:
It is very strange. Surely if half a million public sector redundancies (effectively) have just been announced, that can't be good no matter where you sit. Even if the city wanted cuts, growth simply has to suffer. We have risen 400pt in the last 6 weeks or so. There is something not right there for sure.
For those most part the cuts are already factored into market prices. Plus a very large percentage of the revenues achieved by FTSE 100 companies are from overseas with a notable amount from emerging economies, which aren't affected by our cuts.Blown2CV said:
marsred said:
Blown2CV said:
It is very strange. Surely if half a million public sector redundancies (effectively) have just been announced, that can't be good no matter where you sit. Even if the city wanted cuts, growth simply has to suffer. We have risen 400pt in the last 6 weeks or so. There is something not right there for sure.
For those most part the cuts are already factored into market prices. Plus a very large percentage of the revenues achieved by FTSE 100 companies are from overseas with a notable amount from emerging economies, which aren't affected by our cuts.Similar to expectations of company results. The price before the release represents what people expect.
Regarding cuts not being bad for the market. Well unpleasant as it may sound a "little" unemployment is actually good for business. It's a fact of life that high unemployment means workers are cheaper
The UK economy is not consumer driven in the same way as the States is. So unemployment is not so damaging. Also UK has a little inflation, that helps.
So basically it is what the smart money expected (or less than they feared)
And as noted above the FTSE 100 is not as representative as many people think.
In the States we have the situation whenever Obama says he is going to help the market or economy the Dow jettisons about 150 points.
People fear the unknown, once the damage is known its business as usual.
Business likes to be left alone, nobody likes some knownothing career politician meddling with something they know screw all about.
but... less employment and less pay for the employed (due to increase in supply and decrease in demand for workers) means less spending power, which means economic growth slowing or even shrinkage. It might be good for an individual employee in the short term to get rid of crap employees and lessen the wage bill, but surely in the long term it has definite economic implications. I find it hard to believe that this has been factored into the indices already AND they are now rising apace when it still hasn't even happened yet! Surely if the indices keep on rising that would have an effect on inflation. Is this all too far in the future to affect prices now?
Blown2CV said:
when do people think these spending cuts are going to cause the UK indices to drop?? Uk100 seems to be going up and up and up, regardless of the news, which is weird
To be honest, the events of this week have been priced in for a while.If you look at the constituents of the FTSE 100 why would this weeks domestic news have much impact?
The banks bounced because the levy was less than expected, that was a positive impact.
Miners, Oil and Gas, and exploration are affected by gloabl macro factors and commodity prices, not by the domestic policy of a non producer.
That leaves pharmaceuticals and Telcos as the only other 2 drivers.
Pharmas are global and again this week has no relevance to them.
Telcos, the same.
If anything 500K from public sector takes wage inflation pressure away from the private sector, so this is good news for listed firms which employ large numbers domestically.
Any company that would have a relevence is an insiginificant weight of the index.
Blown2CV said:
but... less employment and less pay for the employed (due to increase in supply and decrease in demand for workers) means less spending power, which means economic growth slowing or even shrinkage. It might be good for an individual employee in the short term to get rid of crap employees and lessen the wage bill, but surely in the long term it has definite economic implications. I find it hard to believe that this has been factored into the indices already AND they are now rising apace when it still hasn't even happened yet! Surely if the indices keep on rising that would have an effect on inflation. Is this all too far in the future to affect prices now?
EXports are the most important factor, notthe local economy. SPending cuts cause unemployment which in turn keeps wages/salaries down making companies who export more competitive. Exports keep the deficit down. Also, if people in teh UK have less to spend, they are also less likely to holiday abroad and so spend their money in the UK on British goods if they are competitively priced (due to lower wage costs).It looks like the markets have quite a way to go on the upside as the cuts in spending come in place and workers pay is kept in check or cut. Also remember that the markets have been kept back for quite a few years, so they are undersold as opposed to the over-hyped "over-sold" banded around by so many.
Edited by Silver993tt on Friday 22 October 11:00
Blown2CV said:
ShadownINja said:
Do you mean FTSE 100? Out of interest, where did you short from?
well the SB co I use have an index called UK100... I presume this not actually the FTSE index and is possibly their own... wonder if this is an error on my part?
ringram said:
I think I read 500K is only 2% of private sector employment.
(ie) Insignificant.
So the cuts will make no difference. Except less money wasted on dross.
That can't be right, I think it's 2% of ALL employed. Otherwise if 500k was 2% of public sector, that would equate to 25m public sector workers (50 * 500K = 25m). There are about 25 million employed people in the UK, which is aboput right, normally it's around 50% of the actual population (take into account children, retired, parents at home etc) (ie) Insignificant.
So the cuts will make no difference. Except less money wasted on dross.
Ok, still irrelevant then.
Over 100k foreigners employed and only a few tens of thousands of brits employed the past year.
Why? Because the foreigners have better quals and work ethic.
Sort that out and the piles of human waste created under labour may actually be worth employing.
Anyway, slight digression, but 500k skilled available workers wont be a problem.
500k useless unemployable people will still cost less on the dole than sitting in an office wasting space and breaking things.
So win win either way.
Over 100k foreigners employed and only a few tens of thousands of brits employed the past year.
Why? Because the foreigners have better quals and work ethic.
Sort that out and the piles of human waste created under labour may actually be worth employing.
Anyway, slight digression, but 500k skilled available workers wont be a problem.
500k useless unemployable people will still cost less on the dole than sitting in an office wasting space and breaking things.
So win win either way.
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