James Sharp & Co’s Post

Yesterday’s #inflation figures saw the UK CPI rate in May returning to the BoE’s 2% target. Digging into the numbers, we found some interesting insights for property investors. While prices continue to rise in all other categories (albeit at a slower rate), Housing and household services, and Furniture and household goods were the only two components to exhibit deflation, and thus offer a negative contribution to overall CPI. Latest figures (% price change, year to May 2024): Housing and household services: -4.8% Furniture and household goods: -1.9% Meanwhile, private rents grew by 8.7% in the 12 months to May; an interesting yet expected disparity. #BoE #Property #Realestate

In September UK house sales rose at the fastest rate since the post-lockdown rebound. Last month UK shop prices fell for the second consecutive month. A cooling UK labour market is continuing to bring down wage growth. Investors now put the chance of the UK central bank delivering two more 0.25% cuts this year at 75%. The commodity market has started to price in the likelihood of supply disruptions in the Middle East, which accounts for about a third of global supply. Libya's eastern-based government and Tripoli-based National Oil Corp announced the reopening of all oilfields and export terminals after a dispute over leadership of the central bank was resolved. Gold prices traded around $2,660 an ounce on Friday, remaining close to all-time highs, supported by safe-haven demand arising from the Middle East conflict. Geopolitical tensions, particularly concerning Israel and Iran, are supporting gold prices and unless these risks subside, prices are likely to remain elevate. US equity futures were mixed on Friday as investors look ahead to the September jobs report for more insights on the labour market. Federal Reserve chair, Jerome Powell signalled that the US central bank would consider reverting to its more usual 0.25% rate cut in November, if economic data remained robust, after delivering a larger than usual 0.5% reduction earlier this month. Read more: https://lnkd.in/eAy4Q9yz #ftse100 #wealthmanagement #stocknews

The RBA has again left rates unchanged at today's meeting, remaining at 4.35%. Their view was that while headline inflation has declined substantially, underlying inflation still remains too high. Although its unlikely that we will see another rate rise, there is no certainty of when rates will start to decrease. As we approach Christmas there has been a declining number of buyers looking on the Central Coast and coupled with today's news I would expect those numbers to slowly dwindle until we reach 2025. This will provide an opportunity for active buyers to potentially negotiate a good deal during the rest of 2024. If you're thinking about buying property and want to have a chat about the market on the Central Coast, feel free to get in touch. 0422527966 Link to the RBA statement: https://lnkd.in/gsx6xGRs

BoE to join the dove party? As we know inflation in the UK has been declining more quickly than what's been expected so in theory this would bring forward when rates are cut by the BoE. But services CPI has not been falling quick enough, and this could put the BoE off from changing their stance, and keep the probability of a first rate cut in August. #GBP #BoE #fxmarkets

UK RPI at 4.3%   Inflation figures show a further small fall in the year-on-year rate of increase – Retail Prices Index (4.3% in March, 4.5% in February). The index itself has moved from 381 to 383, an increase of just over 0.5% for the month. The inflation-linked deposit products we offer at IDAD are linked to RPI, and the rate of increase in RPI continues to remain higher than CPI increase (down to 3.2% from 3.4% in February). The rate of inflation is reducing slightly but remains over Bank of England target and the Index continues to rise. Interest rates seem to be in the ‘higher for longer’ zone but the definitions of ‘higher’ and ‘longer’ remain flexible!!

GBP This morning saw UK Gross Domestic Product (GDP) data come in on expectation at 0.6% for the Quarter April to June and 0.9% Year on Year. This follows a 0.7% growth in the first quarter of the year, although growth in June came in at 0% and the second half is not expected to see as high level of growth as the first half. Much of the growth came from the services sector which is the biggest contributor to the UK economy and far outstripped both manufacturing and construction which both actually saw output fall in Q2. Interestingly, however, Industrial Production and Manufacturing Production both came in higher than expected at 0.8% and 1.1% respectively. The largely positive news from the UK has only modestly moved Sterling’s value up this morning but should ensure that we remain in the upward trading band the Pound has been in since the end of April. EUR Yesterday’s European Gross Domestic Product figures came in on expectations at 0.3% for the quarter and 0.6% for the annual reading, although month on month Industrial Production missed the mark by some margin, coming in at -0.15 from an expected 0.5%. The Euro made good ground against Sterling, touching 0.8590, and the US Dollar – continuing its climb from the previous day to over 1.103. Although commentators are warning that the upside for the Eurozone economy in the second half is limited and the economic outlook remains fragile. With little data of note from the Eurozone today, traders will be looking at UK GDP – which this morning gave Sterling a modest boost - and US Retails Sales for a steer on how the European economy is competing against its peers. USD Year on Year consumer Price inflation data came in a 2.9% yesterday, a little below the expected 3% - the smallest increase since March 2021. This is just one more piece of data, on top of the rise in the unemployment rate and deterioration in other employment market indicators, that makes the FED more likely to cut 0.5% in September and will put pressure on the value of the US Dollar. Today all eyes are on this afternoon’s Retail Sales Data. If that comes in weaker than the expected 0.3% month on month, expect the Dollar to come under pressure. Then we have a couple of FED speakers who should put some colour on the numbers.

UK CPI Inflation fell to 3.4% YoY in February. It fell by more than the fall anticipated by markets and to the lowest annual rate since September 2021 when it was 3.1%. Whilst still above the Bank of England's 2% inflation target, the continued movement in inflation back towards target increases the prospect of interest rates being announced by the Bank of England and adds further credence to our view that interest rate cuts are a question 'not of if, but when.' Market consensus on this morning's CPI print was 3.5%. Whilst not a tremendous gap, inflation coming in 0.1% lower than expected has reduced yields (and therefore increased the market value of bonds) by; • 0.055% on a 2 year Gilt (now 4.231%) • 0.063% on a 5 year Gilt (now 3.902%) • 0.057% on a 10 year Gilt (now 4.108%) Positive news therefore for bond holders, and if these falls in market yields hold, it may also mean good news for borrowers should these lower rates be passed on by lenders. Potential lower rates aren't a positive for everything though. A greater chance of rate cuts relative to other regions has a negative impact on a nation's currency. If future expected interest rates are lower, then international investors anticipate a lower return from allocating money there and reallocate to other regions - a reaction which negatively impacts the currency. The British Pound has fallen by 0.23% versus the US Dollar this morning, meaning your Pounds get you less far than they did if you're travelling stateside, or that you now need to stump up more of them should you wish to buy overseas assets such as US equities. On the flip side, if you have an investment portfolio that's globally diversified already then you may in fact view such moves more positively as overseas assets are now, when translated to GBP, worth more than they were. Not advise. Financial Market moves correct at time of writing, and please note all changes quoted are intraday, short term moves. #UKinflation #rateexpectations #marketcommentary

After this morning’s Feb #CPI report in #Canada, real policy rates in Canada have tightened to levels not seen in over 15 years. While not a perfect gauge, the real policy rate (or the overnight target rate minus inflation) gives us a sense as to how restrictive current policy settings are relative to current #inflation. For instance, the #CAD real policy rate is at 221bps (using headline CPI on a NSA basis), 260bps (using CPIX), and 180-190bps (using CPI-Trim and CPI-Median). In equilibrium, the #BoC real neutral rate is estimated to be anywhere between 0bps and 100bps as of its last estimate published in the April 2023 MPR. The above tells us that with progress made on price pressures thus far, extant BoC policy has become too restrictive. Rate cuts are coming in Canada - with the initial starting point most likely in June (April is too soon and we won’t have the March CPI report in hand ahead of then). Incoming data will be informative for the cadence of rate cuts beyond June. 

This mornings UK data revealed inflation figures coming out higher then expected. The UK Core inflation Rate Month on Month rose to 0.4% (forecasted 0.3%) and Year on Year increased to 3.3% (expected 3.1%). PPI figures also showed price hikes for producers, with Core Output Month on Month up to 0.3% and Year on Year at 1.7%. These inflationary figures led to Sterling strength, pushing GBP/EUR into the 1.20s and GBP/USD to 1.27, before it retracted back to 1.26 by mid-morning. With inflation rising in the UK, the main question is whether the BoE changes their decision to leave any further cuts till next year. #UKEconomy #Inflation #SterlingStrength

The core consumer price index in the US, which excludes the cost of food and energy, increased by 0.4% in March compared with the previous month and 3.8% on a year-over-year basis in a development that called into question the prospect of an imminent interest rate cut by the Federal Reserve.