Good morning! Here’s what you need to know in markets on Thursday.
House price growth continued its slowdown in June, according to the latest residential housing survey from the Royal Institute of Chartered Surveyors. The group’s UK Residential Market Survey, regarded as the best lead indicator for house prices, found the net balance of surveyors predicting price rises fell to +7% in June, down from +17% in May. That represents the softest reading since last July, the month immediately following the EU referendum.
The European Union remains an incomplete project and will require changes to its treaties that bring greater convergence between euro zone member states, French President Emmanuel Macron said in comments published on Thursday. In an interview with French regional daily Ouest France, Macron, who favours deeper European integration, said Germany was benefiting from a “dysfunctional” euro zone.
Stocks rallied and the Dow hit an all-time high on Wednesday after Federal Reserve Chair Janet Yellen said the US economy was strong enough to absorb gradual rate increases over the next few years. The industrial stocks average rose 123 points, or 0.57%, to close at 21,532.
Yellen spent Wednesday morning testifying in Congress. “Because we also anticipate that the factors that are currently holding down the neutral rate will diminish somewhat over time, additional gradual rate hikes are likely to be appropriate over the next few years to sustain the economic expansion and return inflation to our 2 per cent goal,” Yellen said in prepared remarks for her Humphrey-Hawkins testimony.
The Bank of Canada raised rates for the first time in seven years. Data from the overnight index swaps market showed a nearly 80% chance of another hike by December, while Canada’s 2-year yield touched its highest since September 2014 at 1.172%.
Former Education Secretary Nicky Morgan will be the next chair of the Treasury Select Committee, it was confirmed on Wednesday as MPs voted to elect her to the position. She beat five other candidates, garnering 290 votes, including North West Somerset MP and sitting TSC member Jacob Rees-Mogg, who got 226 votes, to take the role.
Chinese trade data shot the lights out in June with exports and imports breezing past expectations. According to China’s Custom’s Bureau, exports jumped by 11.3% from a year earlier in US dollar-denominated terms, topping the 8.7% level that had been forecast by economists. It was also an improvement on the 8.7% level reported a month earlier. On the other side of the ledger, import growth also impressed, lifting 17.2% year-on-year. That was above the 13.1% increase expected and accelerated on the 14.8% rate of May.
Investors are taking on too little risk in the stock market as they overthink why it remains calmer than normal, according to BlackRock, the world’s largest asset manager with $US5.4 trillion in assets under management as of March 31, 2017. This caution is being reflected in measure of investor fear, such as the CBOE’s Volatility Index for the S&P 500, which sits below its historical averages, suggesting to some that the market is too complacent.
Royal Bank of Scotland on Wednesday announced that it has reached a settlement with the US Federal Housing Finance Agency (FHFA)over the misselling of $US32 billion of mortgage-backed securities in the run-up to the 2008 financial crisis. RBS said in a statement on Wednesday lunchtime that it has agreed to pay $US5.5 billion (£4.2 million) to settle with the FHFA, which is withdrawing its legal cases against RBS as part of the settlement.
Wetherspoon boss Tim Martin on Wednesday pointed both barrels at the City’s regulator, sections of the media and leading business organisations. A prominent Brexiteer, Martin said the fact that Prime Minister Theresa May and Labour leader Jeremy Corbyn won “more votes for their parties than many thought possible” backed up the UK’s referendum result. He added: “Thoughtful MPs and commentators realise that the UK star is irrevocably hitched to the Brexit caravan.”
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