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Inflation Causes The FTSE100 Index To Take A Dive

The FTSE100 index of leading UK shares dropped on Friday to a three-month low. The index is sensitive to any change in economic sentiment, and it has been dropping since last summer. This drop comes at a time when the UK is taking stock of its ability to remain competitive in an increasingly globalized economy. In addition, the financial services industry has been on a downward spiral for some time. It has recently picked up due to higher stamp duty rates and tighter regulations for lenders, but this may not last.

What causes a company’s shares to fall? When business assets are divided up amongst owners as part of the sale of a business, one of the first parts of the money owed to creditors is that of the company’s shareholders. When large numbers of businesses are sold, they are often left with very little stock left – meaning that there won’t be any profits to split among the partners. This means that they will all be forced to seek higher investment, thereby forcing their creditors to increase their demands for payment. Consequently, the price of the shares rises, pushing the firm’s value down further.

A large percentage of UK business assets are in businesses that are sensitive to market fluctuations. Examples include utilities such as water and rail companies, whose prices are set by governments and regulators, and the retail sector such as Britain’s Channel Island Car Park Company. As business assets are divided up amongst large numbers of stakeholders, the businesses affected are forced to take on more debt, as their own profits are eaten up by the costs of running the business. As a result, even when inflation pressures are lower than usual, the effects of high inflation can still lead to sharp falls in the FTSE100.

The problems faced by businesses are also likely to become worse in the months ahead. The FTSE100 is based on a computerized system, whereby businesses are valued according to the net present value of their stocks. If this value increases, then the value of stocks is also expected to increase. However, if the value of stocks decreases, then the value of the FTSE100 will drop. Therefore, a rise in the FTSE100 during the second half of 2021 will not be a surprise, especially since it is expected that oil stocks will also suffer heavy falls.

In order to take advantage of the falling prices, businesses selling stocks should purchase FTSE100 options which give them a better chance of earning profit when the prices of the index are high. Since there are a number of different types of FTSE100 options, it is best to look for one which matches your needs. For example, you can opt for call options, which allow you to sell a specified stock at a specified price when the value is high. On the other hand, put options allow you to buy a specified stock at a specified price when the value is low. By doing so, you will only receive a small amount, but you will have the opportunity of earning much more when the value of the stock rises.

This situation can prove to be very advantageous for those who own FTSE100 options as they will earn profits even when the prices of the index drop. However, you should note that this scenario does not necessarily mean that investors will always earn profits. Just like in any other investment scenario, there will be both winners and losers in this scenario. Those who bought shares at a lower price will be affected negatively while those who sold their shares at higher prices will be able to enjoy a higher income. This situation can prove to be very helpful for investors who can predict where the FTSE100 index will fall and then buy FTSE100 options which can allow them to purchase the shares at a lower price and sell them at a higher price when the value of the stock increases.

MSP Business News