Is the FTSE’s fall signalling a slowdown?

On the face of it, the sharp decline in the FTSE 100 to its lowest level since last October appears to be a bad portent regarding the sustainability of the UK economy’s recovery.

However, the FTSE’s global orientation means that it is no longer a good bellwether for the future health of the UK economy and its weakness partly reflects sterling’s rise, itself a sign of confidence in the UK’s outlook. The FTSE’s underperformance also reflects the fall in oil prices and expectations that profit margins will be squeezed – developments which should support the economy’s growth.