No hard landing in sight for the UK market

outlook

Higher interest rates in the UK are likely to lead to the market underperforming others but the economy will be ahead of the game in terms of bond yields

The UK starts the new year on the back of a mixed end to 2003. Economic activity picked up in the latter stages of last year, while equities returned more than 20% during the course of the year. The policy background, however, was not so positive. The MPC delivered the first of what is expected to be a series of interest rate rises aimed to cool an overly buoyant housing market. A key concern for 2004, therefore, is how the UK economy will withstand the onset of likely monetary tightening. First, however, given the historically close correlation between the UK and the US economies and the...