City Watch: FTSE is showing resilience, says Charles Sylvester of Charles Stanley & Co

INCREASINGLY, the crisis within the eurozone is threatening to slow growth around the world and cause further financial instability.

The most recent summit (the 19th in the last year, I think, but it’s hard to keep track) between finance ministers resulted in further funds for the beleaguered banks, although no-one seems sure where the money is coming from.

I suspect the current policy of “muddling on” will keep the euro alive for the time being, but we are getting ever closer to the moment when European politicians are going to have to make hard decisions. While greater fiscal unity would be a solution to many of the troubles, it seems unlikely that all member states are yet ready to surrender their independence.

In many ways the UK equity market has remained relatively resilient in the face of bad news; the FTSE 100 index is down 8% from its recent high on March 16. Admittedly volumes are low and substantial company share buybacks are helping to stabilise share prices, but good company profits have also helped boost the market.

However the UK economy is still mired in recession and the Bank of England, along with the Treasury, announced measures to offer the banks six-month liquidity in tranches of no less than �5billion a month for a minimum of four months and an �80bn funding for a lending scheme aimed at helping the banks supply new credit to individuals and smaller businesses.

All in all it looks as though the equity market will, in the face of so many uncertainties, remain volatile. One should be looking to buy on dips and probably sell a few of one’s weaker holdings on any rallies. Meanwhile dividends will continue to be a major part of the immediate return for investors.

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