Stocks remain under pressure

The FTSE is trading lower once more this morning with global equities remaining under pressure heading into end of the month, quarter and 1st half of the year. The pound remains little changed in what is turning out to be a quiet week for sterling with the latest financial stability review from the Bank of England throwing up no great surprises and having negligible market reaction.  

BoE says Brexit the main domestic risk

The release of the bi-annual financial stability review from the Bank of England was broadly inline with expectations, with Brexit risk unsurprisingly remaining the greatest domestic threat. Comments that the UK banking system could support the economy through a disorderly Brexit were one of the most positive aspects of the report, with domestic risks excluding Brexit seen to remain as standard overall. The report stated that credit growth remains rapid and also opined that global risks are material and are increasing, with emerging markets, Chinese debt, US leverage and Italy amongst the most prominent of these.

Pound risks skewed to the upside?

Sterling has drifted back lower against the US dollar, dipping below the 1.32 handle once more as the pair struggles to build on last week’s gains following the hawkish shift in the BoE. The odds of an August rate hike remain at coin toss levels, with around a 50% probability currently assigned by the market to an additional increase. This indicates that there is a fair amount of scope for both positive and negative surprises in the coming weeks, although on balance there is probably more room for upside shocks as far as the pound is concerned given the negativity in recent months and the fact the the government has seemingly passed through the latest bout of Brexit risk relatively unscathed.    

UK house price growth slows further

The pace of annual growth for houses in Britain has hit its lowest level in 5 years, with the continued subdued levels of new buyer enquiries and a lack of properties on the market cited as the main reasons according to Nationwide. London once again was the worst performer with prices down 1.9% Y/Y; the only region to see a decline in prices. London’s average property price is now £468,845 compared to a UK average of £214,578 - a premium of almost 120%.   

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