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FTSE slips after deficit warning

FTSE slips after deficit warning

Category: Economy

Updated: 08/06/2010
First Published: 08/06/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The FTSE 100 index slipped below the 5,000 mark this morning after new fears over the state of the UK's finances emerged.

Both the pound and UK stock markets fell after a ratings agency claimed the fiscal challenges facing the UK remained formidable.

Fitch Ratings said that the budget deficit needed to be reduced more quickly than under plans outlined by the previous Labour government in April's Budget.

It added that since 2008, the UK's debt ratios had increased faster than those of any other AAA-rated sovereign.

While welcoming the new Government's swift implementation of a £6 billion spending cut, Fitch warned more action would be necessary in the coalition's emergency Budget on 22 June.

Sterling fell immediately after the publication of the report, while the FTSE 100 index slipped below 5,000.

It had recovered slightly to stand at 5,039 at 2pm this afternoon.

The recent slide in the stock markets highlights the risks associated with equity investments and showcases the benefits of cash based savings accounts.

While the potential returns on offer through equity investments can be significant, particularly over the long term, there is always the danger that the value of an investment can go down as well as up.

However, with savings accounts such as fixed rate bonds, the initial investment is guaranteed while providing the opportunity to earn interest.

Fixed rate bonds usually pay a set amount of interest as long as you are willing leave your money untouched for a certain period of time.

Top of the medium term fixed rate bond chart at present is a three year fixed rate bond from ICICI Bank paying 4.15%.

A three year offering from Lloyds TSB is not far behind, paying 4.10%.

In the short term fixed rate bond market, a one year account from Barnsley BS paying 3.00% is amongst the most competitive around.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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