UK avoids recession | pound rebounds | House prices soften
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4.30pm: Housebuilders recover
The FTSE 100 followed an upturn in the US to close 12.22 points higher at 6,893.81.
Housebuilders were among the top gainers, rebounding from recent heavy losses on concerns about the impact of rising interest rates. Barratt Developments, Persimmon and Taylor Wimpey all gained.
On Wall Street, stocks, the Dow Jones Industrial Average was 0.25% higher, the S&P 500 up by 0.61% and the Nasdaq Composite up around 1%.
Economy grew – pound rebounds
Britain’s economy defied expectations that it may already be in recession by growing in the second quarter, according to official data.
The Office for National Statistics said economic output rose by 0.2% in April through June, revised up from a previous reading of a 0.1% contraction.
The figures imply the UK is not currently in a recession, as predicted by the Bank of England earlier this month.
The economy is still languishing below pre-pandemic levels however, as the figures showed real gross domestic product was still 0.2% below the levels in the final quarter of 2019.
Sterling continued to rebound today after the week’s events and was heading for its best week since the end of 2020 following intervention by the Bank of England to shore up the currency.
The pound was quoted at $1.1168 early today, up from $1.1033 at the London equities close last night.
This saw it on course for a 2.26% rise over the week, taking it close to erasing all of the precipitous losses since the mini-budget.
There was a modest slowing in annual UK house price growth to 9.5% in September, from 10% in August, according to Nationwide Building Society.
It means annual house price growth slowed to single digits for the first time since October last year.
Prices were unchanged over the month from August, after taking account of seasonal effects. This is the first month not to record a sequential rise since July 2021.
Nationwide’s quarterly data showed a further slowdown in Scotland to 7.8%, compared with 9.5% last quarter.
Robert Gardner, Nationwide’s chief economist, said: “The reduction in stamp duty [in England] may provide some support to activity and prices, as will the strength of the labour market, assuming it persists, with the unemployment rate at its lowest level since the early 1970s.
“However, headwinds are growing stronger suggesting the market will slow further in the months ahead. High inflation is exerting significant pressure on household budgets with consumer confidence declining to all-time lows.
“Housing affordability is becoming more stretched. Deposit requirements remain a major barrier, with a 10% deposit on a typical first-time buyer property equivalent to almost 60% of annual gross earnings – an all-time high.
“Moreover, the significant increase in prices in recent years. together with the significant increase in mortgage rates since the start of the year. have pushed the typical mortgage payment as a share of take-home pay well above the long-run average.”
On Wall Street, the Dow Jones Industrial Average ended down 1.5%, and the S&P 500 closed down 2.1%. Tech stocks fared particularly poorly, with the Nasdaq Composite ending the day 2.8% lower.
Gloomy ING analysts warned: “That puts year-to-date losses [for the S&P 500 and Nasdaq] at respectively 24% and 31%. And we’d be inclined to argue that we haven’t yet seen the bottom.”
Stocks in Asia were also trading beneath the water line. Tokyo’s Nikkei 225 index was down 2.3%.
The Shanghai Composite was down 0.2% after China’s manufacturing sector fell deeper into decline this month.
The Hang Seng index in Hong Kong was down 0.1%. The S&P/ASX 200 in Sydney was 1.1% lower.
Brent oil was trading at $87.89 a barrel.