Abstracts » Business

Bank slight

Article Abstract:

United Kingdom stock prices dropped after the UK appeared less likely to join European monetary union (Emu) at an early date. This stock price fall implies that markets see a European central bank as likely to deliver lower interest rates than the bank of England. Such an assumption may be misguided and if rates were lower with Emu, they could be so low that they would pose an inflationary threat. There is no easy way to tackle UK inflation, though markets may not realise this.

Interest Rates, Western Europe, Monetary unions

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The rewards for earnings risk

Article Abstract:

Forecasts for corporate earnings growth in the United Kingdom are too optimistic, and this means that there are dangers for investors in UK stocks. Dividends could be affected as well as earnings. Earnings yields are higher than bond yields, so investors may be compensated for the risks they take on when they buy stocks. Low inflation may bring lower dividend yields, but there is a danger that low inflation could lead to deflation, which would increase the equity risk premium.

Financial markets

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