Economy

UK rental prices rose to the highest on record while house price growth declined as higher mortgage rates hit the property market, according to official statistics published on Wednesday.Private rental payments paid by tenants increased by 5.1 per cent in the 12 months to June, the largest annual percentage change since the data series began in January 2016, figures published by the Office for National Statistics showed.London’s annual percentage change in private rental prices was 5.3 per cent in the 12 months to June, above the England average and its highest annual rate since September 2012.Neal Hudson, a housing market analyst, said the surge in rental prices was not unique to the UK. A post-pandemic bounce back in demand, combined with rising interest rates that push up landlords’ mortgage costs, have led to similar price rises in US, Canada and Ireland.But in the UK, Hudson said, the situation had been exacerbated by a shift to longer tenancies, which had reduced turnover, and by landlords selling or shifting to temporary lettings, squeezing an already scanty supply of rental properties. “I had wondered if it was a temporary issue but it’s going on for longer,” he said.Recent surveys have shown rental demand strengthening as higher mortgage rates leave fewer people able to buy a property. The ONS data showed that average UK house prices fell by 0.4 per cent, on a seasonally adjusted basis, between April and May. This took the annual rate of increase down to 1.9 per cent, from a revised 3.2 per cent in the previous month. The weakest growth over the past year has been in London, where prices are highest and buyers more indebted. “House prices already were falling before the renewed jump in mortgage rates,” said Gabriella Dickens, economist at the consultancy Pantheon Macroeconomics, adding that more timely surveys suggested the price falls would become steeper in the coming months.House prices have so far proved more resilient than many economists had expected in the face of rising interest rates, although the number of transactions has fallen sharply.

Dickens noted that the fall in May still left average prices a “whopping” 24.6 per cent above their average level in 2019.Hudson said many people appeared to be settling for smaller properties, while taking on mortgages with longer terms and payments that would absorb a bigger share of their income. This resulted in “an even worse version of the already failing housing market we had last year” — with new buyers straining themselves for “a home that is probably smaller, further away and less appropriate”. More

WASHINGTON (Reuters) – Emerging market economies bore the brunt of the strongest U.S. dollar in two decades in 2022, a rise that battered them with capital outflows, higher import prices and tighter financial conditions, the International Monetary Fund said on Wednesday. The IMF said new research in its annual External Sector Report shows that the dollar’s surge last year had a bigger impact on emerging markets than on smaller advanced economies, partly due to the latter group’s more flexible exchange rates.For every 10% of U.S. dollar appreciation linked to global financial market forces, emerging market economies faced a gross domestic product (GDP) output decline of 1.9% after one year, a drag that is expected to linger for 2.5 years, the IMF said.The same research showed the impact was far lower in advanced economies, with output reduction peaking at 0.6% after one quarter and the effects largely gone within a year.The IMF said in the report that the dollar’s real effective exchange rate rose by 8.3% in 2022 to its strongest level in two decades, amid a rapid series of Federal Reserve rate increases to curb inflation and higher global commodity prices driven by Russia’s invasion of Ukraine.”Emerging market and developing economies with pre-existing vulnerabilities such as high inflation and misaligned external positions experienced greater depreciation pressures, while commodity-exporting economies benefited from the increase in commodity prices,” the IMF said.Many emerging market economies suffered worsening credit availability, diminished capital inflows, tighter monetary policy, and bigger stock market declines.In advanced economies, more flexible exchange rates were able to absorb some of the impact through depreciation, while more accommodative monetary policy also helped – provided that there were firmly anchored inflation expectations, the IMF said.”More anchored inflation expectations help by allowing more freedom in the response of monetary policy. After a depreciation, a country can run a looser monetary policy if expectations are anchored. The result is a shallower initial decline in real output,” the report’s authors said in a blog posting.”In turn, emerging market economies with more flexible exchange rate regimes tend to enjoy a faster economic recovery owing to a sizable immediate exchange rate depreciation.”The IMF recommended that emerging market countries move toward flexible exchange rates by developing domestic financial markets that reduce the sensitivity of borrowing to the exchange rates, and commit to improving fiscal and monetary frameworks, including central bank independence, to help anchor inflation expectations. The External Sector Report showed IMF staff assessed that the dollar was over-valued in 2022 by 3.5% to 14.6%, with a midpoint of 9%. As of April 2022, the IMF said the dollar’s value was 0.5% below its 2022 average.The Fund also said that the euro was over-valued in some eurozone countries, by about 10% in Italy and Finland, while it was undervalued in others, by 8% in Germany. More

China’s private sector has been hit by COVID-19 curbs and a wide-ranging regulatory crackdown that targeted sectors from technology to property.The authorities have started to reverse some policies to try and bolster the economy, with policymakers holding a series of meetings with companies from sectors ranging from tech to modern logistics to try and boost confidence.The country will encourage some private companies to issue technology innovation bonds, and support eligible businesses to list and refinance, state news agency Xinhua reported the guidelines as saying.The authorities will also support so-called platform companies to play an important role in job creation and international competition. Private companies will be encouraged to increase investment in areas such as power generation and storage, and the industrial internet.”The private sector is a new force to promote Chinese-style modernisation, an important foundation for high-quality development and a key force to promote China’s comprehensive construction of a socialist modern power,” Xinhua said.Private fixed-asset investment shrank by 0.2% in the first six months from a year earlier, in contrast to an 8.1% rise in investment by state entities, official data showed on Monday, indicating weak private sector confidence.The world’s second-largest economy grew at a slow pace in the second quarter as demand weakened at home and abroad, raising pressure on policymakers to deliver more stimulus to shore up activity. More

LONDON (Reuters) – Investors scaled back their bets that the Bank of England will hike interest rates aggressively after lower-than-expected inflation numbers on Wednesday prompted a huge rally in British government bonds.Consumer price inflation slowed to 7.9% in June from 8.7% in May, a bigger drop than almost all the economists polled by Reuters had expected. Core and services inflation – closely watched by the BoE – cooled too.Markets responded in dramatic fashion.Before Wednesday’s data, investors had assigned a roughly 60% chance that the BoE would hike rates on Aug. 3 by a half-percentage point. That turned into a 60% chance of a quarter-percentage point hike after the data.The predicted peak for Bank Rate was no longer priced in at 6% with the overnight index swap curve showing just as much chance of a 5.75% peak.Gilt yields dropped sharply, especially for shorter-dated bonds that are most sensitive to the interest rate outlook.”June’s inflation data will make welcome reading for gilts and the BoE alike,” Michael Metcalfe, head of macro strategy at State Street (NYSE:STT) Global Markets, said. “But after upside surprises totalling a not-so-cool 1.5% in the past four-months, it will take more than just one month’s data to calm rate markets.” The two-year yield was down 27 basis points on the day at 1108 GMT – on track for the biggest daily drop since March 13, when bonds surged after the collapse of Silicon Valley Bank. The yield fell as low as 4.800%, its lowest since June 15.Yields for longer-dated gilts fell sharply too, with the 10-year yield down 18 bps on the day.The gap between 10-year gilt and German Bund yields – which had widened sharply in recent months to reflect Britain’s more acute inflation problem – narrowed to 185 bps from 199 bps on Tuesday its lowest level in over a month. More

Shares in UK property groups and housebuilders surged on Wednesday as investors dialled back their expectations for where interest rates might peak after inflation fell more than expected in June.Persimmon climbed 8.3 per cent, while Barratt Developments and Taylor Wimpey rose 7 per cent and 6.8 per cent respectively, helping London’s FTSE 100 close 1.8 per cent higher, after data showed UK inflation last month dipped to 7.9 per cent, a 15-month low.June’s modest slowdown in inflation will provide welcome relief for the property groups, housebuilders and other rate-sensitive sectors that dominate the FTSE 100, according to Russ Mould, investment director at broker AJ Bell.“If there’s even a sniff of a peak in rates, you can construct a case for the FTSE 100 owing to its exposure to builders, banks, insurers and staples,” Mould said. “The thought process will be ‘Oh, rate rises are coming more slowly, that means we’re near the top. And after the top there has to be a cut’.”The UK property sector has endured a challenging few months as the Bank of England raised rates to 5 per cent to tackle the UK’s stubborn inflation problem. Higher borrowing costs have pushed up mortgage rates, dented sales and exacerbated concerns of a drop in house prices.Barratt last week said demand for new homes dropped almost a third in the year to June 30, shortly after housebuilder Berkeley Group said sales of new properties decreased 15 per cent on a like-for-like basis in the year to the end of April. Successive rate rises by the BoE had “reduced buyers’ spending power, weakened sentiment in the UK property market and acted as a drag on activity”, said Chris Druce, senior research analyst at Knight Frank. A single modest drop in inflation was unlikely to change much, Druce added. “Nerves are unlikely to be calmed and the outlook improved until buyers can gauge where the new peak in the bank rate will be.”June’s relatively benign inflation figures come after months of stronger than expected price growth. Traders on Wednesday lowered the level at which they think interest rates will peak to just under 6 per cent. Others warn that rates have further to climb, further squeezing prospective buyers and homeowners. “The [BoE] has been clear that it must see the job through when it comes to bringing inflation down to its 2 per cent target, so it’s widely expected that it will raise interest rates again in a few weeks’ time,” said Clare Batchelor, mortgage operations manager at Wesleyan. “Potentially, we’ll see even more rate rises beyond that later this year if prices are still rising too quickly,” Batchelor said. “This will ring alarm bells for those seeking a mortgage or who are about to slip on to a variable deal.”In June, house prices fell at the fastest annual pace since 2011, according to mortgage provider Halifax, while the average rate on a two-year fixed mortgage last week hit 6.66 per cent, the highest level since 2008.Separate data released on Wednesday showed private rental prices paid by UK tenants increased 5.1 per cent in the 12 months to June, the largest annual percentage change in data gathered by the Office for National Statistics stretching back to January 2016. More

The central bank has in recent years expanded its arsenal of structural policy tools, including relending and rediscount facilities and other low-cost loans. A senior central bank official said last week that the bank will use policy tools such as the reserve requirement ratio (RRR) for banks and its medium-term lending facility to weather the challenges facing the world’s second-largest economy.Data this week reinforced views that China’s post-COVID recovery is faltering rapidly, raising pressure on policymakers to deliver more stimulus to shore up activity.($1 = 7.2153 Chinese yuan renminbi) More

Bank analysts are sharply divided over just how bad Goldman Sachs’ second-quarter earnings will be, offering a much wider range of estimates than is typical for the Wall Street company.There is a consensus that it will not be one of Goldman’s best quarters, but some are predicting it could be one of the bank’s worst when it reports later today.Earnings estimates range from Goldman making 33 cents per share and barely eking out a profit, to almost $5 a share and netting more than $1.5bn.While it is not uncommon for analysts to disagree, the debate over what Goldman, led by chief executive David Solomon, will report is more divided than usual.Like its peers, Goldman’s earnings are suffering from a sharp drop in investment banking fees and a slowdown in stock and bond trading. But the bank’s profits will also likely take a hit from the recent acquisition of home improvement lending business GreenSky and losses from its consumer and commercial real estate loan portfolios. Read more on what to expect from Goldman’s earnings. Read more on banks: Corporate and institutional depositors are demanding higher rates on their deposits and are beginning to shift their funds in search of a higher yield, yesterday’s results show.Here’s what else I’m keeping tabs on today: Results: Tesla, Netflix, IBM, United Airlines and Halliburton also report earnings today.Economic data: New US residential construction starts from the commerce department. US Congress: Israeli president Isaac Herzog will address a joint meeting of the House of Representatives and Senate.Five more top stories1. Donald Trump has said he is the target of a new criminal probe into efforts to overturn the results of the 2020 US presidential election, raising the possibility he could face fresh federal charges in the coming days. The former president yesterday said he had received a letter from the Department of Justice informing him of the investigation. Read the full story.More on Trump’s legal troubles: The former president has at least six cases against him. Here’s a breakdown of each.2. Exclusive: Vladimir Putin ordered the seizure of Danone and Carlsberg’s Russian operations after businessmen close to the Kremlin expressed an interest in the assets, according to people close to the decision. Read the full story.More on the Ukraine war: Saudi Arabia and Turkey are seeking to broker a deal to repatriate thousands of Ukrainian children taken to Russia and held in children’s homes or adopted by Russian families.3. A US economist chosen for one of the top posts in the European Commission’s competition division has withdrawn after the appointment provoked a backlash, led by France. Read more on the decision by Fiona Scott Morton, a former Obama administration official, not to take a job in Margrethe Vestager’s department. 4. Microsoft is to charge $30 a month for generative artificial intelligence features in its software used by hundreds of millions of office workers. The premium is bigger than expected on a technology that many in the industry hope will bring a powerful boost to revenues. Microsoft chief executive Satya Nadella revealed more details of the charges in an interview with the Financial Times. 5. Big investment banks are turning more bearish on the dollar in the wake of last week’s unexpectedly large drop in US inflation. Morgan Stanley, JPMorgan Chase, Goldman Sachs and HSBC are among the lenders to have either scrapped bullish dollar calls or forecast further declines for the currency as expectations grow of a “soft” economic landing. Read more on the forecasts for the future direction of the dollar.The Big Read

© FT montage: AFP/Getty/Dreamstime

After Switzerland joined the embargo imposed on Moscow following Russia’s full-scale invasion of Ukraine, much of the Russian oil trade in Geneva shifted to the Middle East. According to a Financial Times analysis, companies registered in Dubai bought at least 39mn tonnes of Russian oil worth more than $17bn between January and April — about a third of the country’s exports declared to customs during that period.We’re also reading . . . Fossil fuels: Shell and ExxonMobil cannot lead us out of the climate crisis. Only governments have the power to cut demand for oil and gas, writes Pilita Clark.Training AI: Tech groups including Microsoft and OpenAI are experimenting with computer-made “synthetic data” to train artificial intelligence models.The FT View: Hollywood’s strikers are writing the script for other industries as they argue over how to divide the spoils in the new era of digital delivery. Chart of the day

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Spain is likely to become the latest European country to shift to the right after Sunday’s general election. Polls suggest the hard right Vox party will emerge as the power broker in a coalition led by the conservative People’s party although Alberto Núñez Feijóo, leader of the PP, is fighting to avoid sharing power with the populist party. Read more on Spain’s upcoming election. Take a break from the newsGreta Gerwig’s Barbie film is a seamless blend of infectious, Day-Glo wit that also peers into the chasm between the have-it-all vision of femininity sold to little girls by the doll’s maker Mattel and the grinding, impossible choices that face many adult women, writes Danny Leigh in his 4-star review.

Margot Robbie and Ryan Gosling as Barbie and Ken, leaving Barbie Land for the Real World

Additional contributions by Tee Zhuo and Benjamin Wilhelm More

If you ever need advice about breaking up with your bank, just ask Bruno J. Navarro. He has done it three times.The technology marketer from Maplewood, New Jersey, cut ties for a variety of reasons, such as increased fees and low interest rates on savings. Sometimes the process is straightforward, sometimes it’s trickier – but Navarro has no qualms about packing up his financial accounts and heading to another institution.“I’d say just go ahead and jump in,” says Navarro, 51, who has left banks like Chase, TD and Capital One and currently uses a credit union. “It might be a few minutes of pain to fill out forms, but I’m much happier having found financial institutions with customer-friendly policies and practices.”Navarro isn’t alone in switching banks. In fact, 79% of U.S. consumers say they would change banks if they found one to better meet their needs, according to a 2023 poll by financial site The Motley Fool Ascent.The main problem for breaker-uppers: “Banking relationships are sticky,” says Erika Safran (EPA:SAF), a financial planner in New York City. Especially these days: Maybe you get paid by direct deposit. Maybe your monthly bills are set up to come out of those accounts automatically. Your checkbooks, your personal loans, your credit cards – all could be tied to one institution, and all interlinked.In that way, breaking up with your bank can almost feel like the end of a personal relationship: the history, the entanglements, the desire for something better. As the old Neil Sedaka song goes: Breaking up is hard to do.But it can be done – whether because of bad customer service, a lack of brick-and-mortar branches, or annoying fees. A few ideas about how to manage a bank breakup:ONLY MOVE SOME ACCOUNTSLet’s take a very common scenario these days: Your bank is offering almost zilch on savings, while other online banks are offering around 5%.There is no law that says you have to leave your bank to take advantage of that difference. Consider having accounts at two institutions. “It doesn’t have to be painful,” says Matt Stephens, a financial adviser in Wilmington, North Carolina.“Most of the hassle is from switching checking accounts, but most of the benefit comes from switching savings accounts,” Stephens says. “One strategy is to leave your checking account where it is, but move your savings account to a bank with a higher interest rate.”GO THROUGH ALL YOUR AUTOMATIC DEBITS AND CREDITSMuch of our financial lives are automated these days, which is great – paychecks, utility payments, streaming subscriptions and so on.But that makes switching over that much more complicated. If bills go unpaid because they are linked to defunct accounts, that could disrupt services and damage your credit record.Advice from Jennifer Bush, a financial planner in San Jose, California: Go through your last few months of bank statements to identify ongoing charges, and contact every one of those companies to switch them over to your new accounts.As you do so, keep your old account open for a while, just in case there is anything you have missed.“Once you have confirmed that all direct deposits and automatic payments have been switched, and no new transactions are going to the old bank, then you can close the old account,” Bush says.COMPARE AND CONTRASTOften people feel compelled to take action in the heat of the moment – perhaps over anger at an overdraft fee, for example.But the reality is that another institution may have those same fees. You would be wise to do your due diligence beforehand, and study everything from minimum account balance requirements to ATM charges. To work through those issues and weigh your best options, check out the FDIC’s “Banking Checklist” here.As a result of comparison shopping, you may even decide to stay put. But information is your friend and finding something better could quite literally mean thousands of dollars in your pocket.Says Navarro, who is happy, for now, with his current institution: “It doesn’t hurt to shop around and look at interest rates, even if only once a year, or to check out your local credit union to see what you’ve been missing.” More