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F&C says market anxiety is easing

This week’s billion dollar losses announced by Deutsche Bank and profit warnings from UBS and Citigroup have shed more light on the extent of the crisis emanating from the US sub-prime market, according to F&C.

F&C UK Growth & Income Fund manager Ted Scott says this has actually helped to ease market anxiety.

He says: “The comments we are hearing from investment banks are that the problems within the financial system are all out in the open now. This has undoubtedly given some support to the rally in markets this week. However, many investment banks have also announced redundancies, tempering employment expectations in financial markets, the impact of which could feed through to the economy.”

Scott says the gains in financial markets are in stark contrast to increasing evidence of an economy in slowdown.

He says: “This week’s interim results from Barratt Developments, one of the UK’s largest housing developers, were weaker than expected and margins are likely to come under pressure going forward. We believe this implies weakness in the overall housing market as evidenced by today’s Halifax House Price Index, in which house prices fell by 0.6 per cent in September. This marks a continuation of the downward trend in house prices since the end of last year.”

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