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FTSE100 Index Drops As News Of Inflation Rises

The FTSE100 index drops amid rising inflation concerns. This is a concern for many businesses, and indeed many people are putting their funds into companies that are positioned to take advantage of this in order to protect themselves from a potential downfall. With the inflation rate expected to be around three percent over the next year, this can have a drastic effect on many companies’ profits, especially if it rises much further. For this reason, many business owners are looking to cash in on this opportunity and take advantage of the market in the process.

Businesses are finding that there are a number of different factors that come into play when an inflation rise occurs. One is obviously the general price level, but the price level will also depend on how far the economy has fallen while the cost of living is also going up. Therefore, depending on whether or not businesses can offset these higher costs with lower expenses, they can benefit. And in doing so, they can actually see their net worth improve as well. If businesses are able to keep costs lower, they can actually increase profits, which leaves them even more financially stable.

As businesses try and protect themselves against this inflationary pressure, the first place many will look to is the currency market. The FTSE100 index, after all, is driven by the value of the British pound. When an unexpected or major inflationary rise occurs, whether caused by the Federal Reserve or other factors, the value of the pound quickly falls. Therefore, companies that deal with currencies could see their profits rise thanks to a sudden drop in the value of the pound, and as a result, their stock increases.

Of course, even within countries, there are different currencies that can be affected by the inflation. For instance, some worry about inflation may stem from the high level of consumer debt in the United States. As many people are currently underwater in their mortgages, large consumer businesses may find themselves struggling. Because mortgage payments are so large, small businesses rely on their loans and their credit to keep the business going. When that no longer works, the companies find that they are no longer in the green light when it comes to obtaining loans from lenders, and as a result, they often have to make cuts to important areas of the operation.

Even within a country, there are different economic concerns that could cause inflation to rise. The recent spike in Chinese manufacturing comes to mind. While many economists have blamed the drop on oversupply, others point to the impact of the devaluation of the Chinese currency, which has made many products imported from other countries very expensive. The FTSE100 index, meanwhile, is affected by these same worries, and thus many traders are watching the signs of an impending inflation rise.

The FTSE100 has become particularly volatile recently, and many markets around the world have become uncertain. In the United Kingdom, where the recent shake-up in financial markets has occurred, the FTSE100 index has dropped by over two percent over the course of just three days. With such large declines, investors are racing to get out of the stock market before the rates begin to rise again. However, there are some signs of hope. Many analysts believe that inflation may not rise quite to the levels that are expected this year. Instead, they predict that inflation will remain steady at around one to two percent for this year, but may pick up slightly in the future months and years.

On Trac Media News