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Market Update
Market update for w/c 6th May 2008
Money market rates fell during the past week as weaker economic data releases increase the chances of a cut in base rate. 3 month to 9 month rates fell 7bp, with shorter terms unchanged and the 12 month rate off 4bp.
Last week saw weaker economic releases on house prices, mortgage approvals and consumer confidence. Housing surveys from both Hometrack and Nationwide gave falls in their yr-on-yr house price measure, Nationwide’s was the first annual fall for 12 years and Hometrack has now reported 7 straight monthly falls. Mortgage approvals, a leading indicator of housing demand, dropped to 64k in March from 72k in February. Despite BoE’s Special Liquidity scheme there are few signs that credit conditions are loosening. GfK’s consumer confidence index fell to -24 its lowest since the slump of 1992.
Mervyn King stated that a period of slowing growth would not be a disaster and that there was no need for “doom and gloom” about the economy contrasted with Blanchflower’s comments that BoE would need to be aggressive to save the British economy from recession and prevent house prices falling by a third.
On balance, despite the weakened economic outlook, base rate is likely to be on hold at the meeting concluding on Thursday, the MPC preferring not to surprise the market with back-to-back rate cuts, also inflation is still a concern. Next cut June.
Economic data releases to watch over the coming week:
Tuesday - CIPS service sector activity for April Wednesday - Nationwide’s consumer confidence - Manufacturing and Industrial output - BRC shop price index Thursday - NIESR GDP estimate
This page is updated weekly. N.B. Any views expressed above are our personal opinions and should not be relied upon when making investment decisions. |
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Martin Orkin Group Treasurer |
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