Investors have been showing renewed confidence with the prospect of spring returns buoyed by some encouraging corporate deals and the MPCs decision to hold interest rates at 0.5 per cent.

A switch by fund managers back from emerging markets to more developed ones has helped, encouraged by the Tunisian and Egyptian crises.

Ironically, the initially peaceful resolution of those crises dampened the thirst for oil and gold for a while.

True, the cheer that recently sent the FTSE 100-share index back over 6,000 could still prove fragile and a selective approach remains appropriate.

Inflation, at nearly 4 per cent, even by the flattering Consumer Price Index, is double its official target, while across the Atlantic US Treasury bond yields have been rising on concern over American inflation.

Everyone knows and/or assumes the next move in UK interest rates will be upwards.

However, from such a low base, a modest rise might not itself have too serious an impact on business and market sentiment, provided it were at least credible enough to currency-minded foreign investors.


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First published:
Monday 28 February 2011

Publication:
What Investment

Journalist:
Robert Tyerman