Britain's latest rise in property prices is just the calm before the storm

• Will Martin
 

• 6h
• 674
 
• 3
 

Lewis Whyld / PA Archive/Press Association Images

House prices in the UK grew by 5.6% on an annual basis in August, suggesting that Brexit has yet to have any real effect on the British housing market, according to the latest data from Nationwide's highly respected House Price Index.

But this is just the calm before the storm.

Prices grew by 0.6% in the month, compared to 0.5% in July, while annually, prices gained 5.6%, well above July's 5.2% growth.

That monthly rise is the biggest single-month gain since March this year, when a flood of buyers looking to avoid paying extra stamp duty on properties before the introduction of new government rules in April.

Here is the chart, courtesy of Nationwide:

Nationwide

This rise however, looks pretty likely to be a small blip in an upcoming downturn in the British property market, triggered by the economic uncertainty surrounding when and how the UK exits the EU, and what it will mean for the country.

Nationwide's data is pretty much the only post-referendum housing data that has shown any positivity, something the building society's Chief Economist Robert Gardner corroborates, saying:

"The pick up in price growth is somewhat at odds with signs that housing market activity has slowed in recent months. New buyer enquiries have softened as a result of the introduction of additional stamp duty on second homes in April and the uncertainty surrounding the EU referendum. The number of mortgages approved for house purchase fell to an eighteen-month low in July."

For instance, only yesterday, the Bank of England's much-watched Mortgage Approvals numbers showed a massive cooling in the number of people in the country being given mortgages during July, an ominous sign for the future of the market.

Bank of England

According to the figures released by the BOE as part of its July Money and Credit surveys, the total number of new mortgages given out in July was 60,912, down more than 3,000 from May, when 64,152 mortgages were approved.

Not only did July's reading mark a substantial fall from the previous reading, but it was also well below the 61,900 approvals that had been forecast by economists in the lead up to the release. July's reading is also an 18-month low, dropping to a level not seen since January 2015.

As Samuel Tombs, chief UK economist at Pantheon Macroeconomics pointed out earlier on Wednesday morning, the Royal Institute of Chartered Surveyors' most recent data also pointed to a massive cooling in the market. Here's an extract from a flash note Tombs sent clients (emphasis ours):

"The indication from the Nationwide data that house price growthstrengthenedafter the Brexit vote—its index increased by 0.5% month-to-month in July and 0.6% in August, compared to average increases of 0.4% in the first six months of 2016—is incongruous to all the other noises from the housing market.

"For instance, the net balance of surveyors reporting to RICS’ Residential Market Survey that prices increased over the previous three months collapsed to +5 in July, from an average of +36 in the first half of 2016. In addition, yesterday’s mortgage approvals data showed that the average value of loans approved by all lenders for house purchases fell to £171K in July, from £177K in the first six months of 2016. The Nationwide measure is based only on the lender’s mortgage offers, so it susceptible to sampling issues."

Tombs also pointed out that sometimes Nationwide's data is not always 100% reliable in predicting official ONS data, noting that Nationwide's index "consistently overstated house price growth between mid-2013 and mid-2014, and it has understated growth over the last year."

Last week, estate agent group Countrywide warned that property prices across the country will fall by 1% in 2017 as a result of Brexit. This, BI's Lianna Brinded pointed out at the time, will essentially mean Britain's housing market is completely turned upside down over the course of 2017

"Forecasts in the current environment are trickier than ever as the vote to leave the EU has thrown up many risks. Our central view is that the economy will avoid a hard landing, which is good news for housing markets," said Fionnuala Earley, chief economist of Countrywide.

"However, the weaker prospects for confidence, household incomes and the labour market mean that we do expect some modest falls in house prices before they return to positive growth towards the end of 2017 and into 2018."

So, while house prices are still growing for the time being, it does not look like it will last long.

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More: Brexit UK Housing UK House Prices Property Prices

European inflation sucked once again

• Will Martin
 

• 5h
• 510

REUTERS/China Daily

Inflation in the eurozone remained stagnant in August,according to a preliminary reading released by Eurostat on Wednesday morning.

Consumer price inflation, the key measure of price growth, came in at just 0.2% year-on-year in August, a disappointing reading against forecasts, which had predicted growth of 0.3% in the month. July's final inflation reading also sat at 0.2%.

On a year-to-year basis core consumer prices grew by 0.8%, against a forecast of 0.9%, and a previous reading of the same number, also disappointing against forecasts.

Core prices are an important measure because they strip out the most volatile items — things like fuel and food prices, which are subject to massive variations.

"Looking at the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in August (1.3%, compared with 1.4% in July), followed by services (1.1%, compared with 1.2% in July), non-energy industrial goods (0.3%, compared with 0.4% in July) and energy (-5.7%, compared with -6.7% in July)," Eurostat said in a release.

Here is the chart:

Eurostat

The weaker than expected eurozone-wide figures follow on from poor numbers from individual eurozone economies. On Tuesday, German consumer price inflation came in at just 0.3%, down from 0.4% in July, and against a 0.5% forecast from economists.

The inflation release comes just over a week before the European Central Bank's September monetary policy meeting, in which it is expected to signal the potential for further easing of some sort by the end of 2016. That easing could come in the form of another interest rate cut, or the extension of the bank's already widespread programme of quantitative easing.

Claus Vistesen, the Chief Eurozone Economist at Pantheon Macroeconomics believes that Wednesday's numbers present: "A dovish headline which should be enough to push the ECB to extend QE by six months next week."

The measures currently being implemented by the ECB are designed to try and boost stalling inflation, as well as growth, within the eurozone.

So far the ECB's negative interest rate policy (NIRP) has not managed to stimulate inflation, although Draghi has repeatedly said that he and other senior bank officials are convinced the measures are working. The ECB's official inflation target is close to but less than 2%.

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America's stock market is slowing down

• Matt Turner
 

• 13h
• 5,985
 
• 1
 

Robert Shapiro walking his African spurred tortoise Speedbump on Manhattan's Lower East Side in New York in 2005.REUTERS/Keith Bedford KDB/NL

There's a new trend in trading: going slow.

The Chicago Stock Exchange this week outlined plans to adopt what it calls a Liquidity Taking Access Delay, a 350-microsecond delay for those who trade against resting orders on the exchange.

The Chicago Stock Exchange said in the filing that the LTAD was designed to neutralize high-speed traders engaged in latency arbitrage. In plain English, it is trying to stop buyers from taking advantage of out-of-date prices.

The simple way to explain this is to think of a scenario in which there are 13 different versions of eBay. Buyers and sellers are active across all 13 sites, and in theory a pair of sneakers on eBay1 should be the price as the same pair on eBay2.

Given the dynamic pricing, however, there are occasions in which buyers get to an old price before the seller can change it, or vice versa. That's kind of what is happening to the Chicago Stock Exchange.

Here's how the filing describes latency arbitrage:

"'Latency arbitrage' means the practice of exploiting disparities in the price of a security or related securities that are being traded in different markets by taking advantage of the time it takes to access and respond to market information."

The filing says:

"LTAD is designed to neutralize microsecond speed advantages exploited by low-latency market participants engaged in latency arbitrage strategies that diminish displayed liquidity and impair price discovery in national market system ("NMS") securities."

The move is in response to a change in the trading of the SPDR S&P 500 trust exchange-traded fund. The exchange said it first noticed latency-arbitrage activity in the SPDR in January and as a result of this market makers had "dramatically" reduced displayed liquidity. The filing said:

"The Exchange believes that the best way to minimize the effectiveness of latency arbitrage strategies on CHX with respect to resting limit orders is to implement an asymmetric delay, such as LTAD, to de-emphasize speed as a key to trading success."

Now, if all this sounds familiar, it is because it is.

Brad Katsuyama, the CEO of IEX Group, in the lobby of 4 World Trade Center in New York. Thomson Reuters

IEX, the company founded by the heroes of Michael Lewis' book "Flash Boys," is known for its "speed bump," a 350-microsecond delay. The trading venue is launching as an exchange, having won regulatory approval in Julyafter a drawn-out and often ugly consultation process.

The New York Stock Exchange and the Nasdaq, two establishment exchanges that had fought against IEX's approval, have announced their own features.

The NYSE has introduced a Discretionary Pegged Order, which IEX has said is a copy of an order type it created. The Nasdaq in mid-August introduced what it calls an Extended Life Order. Nasdaq CEO Bob Greifeld told Bloomberg TV that the feature was designed to reward investors willing to put in an order in a minimum period of time.

"If you want to put an order in for a longer period of time, we will give you a reward," he said, adding: "You're going to go to the front of the queue, so that means you'll get the earlier execution."

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We've just received a warning about the great hope for China's economy

• David Scutt, Business Insider Australia

• 10h
• 5,825
 
• 5

Chinese tourists at Hong Kong's shopping district Causeway Bay.Reuters/Tyrone Siu

Chinese consumer confidence in August fell to its lowest level since February, a somewhat ominous signal given the dramas the Chinese economy was going through at the beginning of the year.

The latest Westpac-MNI China consumer-sentiment index fell 2.2% to 111.5.

A reading of 100 is deemed neutral, indicating that optimists and pessimists are equal in number. A figure above 100 indicates that there are more optimists than pessimists.

While on balance this is still the case, it is also true that there has never been a sub-100 reading in the history of the survey, dating back to April 2007.

Fitting with the weakness in the headline index, it came as no surprise that four of the survey's five components weakened in August.

Of note, measures on household finances dived, particularly for expected finances, which slumped to the lowest level on record. It fell by 6.8% — the fourth decline in the past five months — leaving the year-on-year drop at 13.4%.

Westpact

That isn't exactly building confidence when it comes to the outlook for consumption, especially as this is being relied upon to power economic growth in the years ahead.

Perhaps explaining the weakness in sentiment, expectations for the labor market continued to deteriorate, with the employment outlook indicator declining to a six-month low of 92.2.

Chinese policymakers are attempting to remove excess capacity from the nation's industrial and commodities sector, resulting in widespread job losses.

Perceptions toward business conditions also weakened, with the measures looking one and five years ahead sliding by 4% and 0.9%.

Despite the weakness in the gauges measuring personal finances, the only component that improved in July was durable buying conditions — a measure on expected spending — which rose by a robust 2.1%.

Westpac notes there was a significant increase in car-buying sentiment, with the survey's car-purchase expectations indicator moving back above the 100 level to its highest since April.

Though he believes some of the weakness in August could have been caused by isolated events, Matthew Hassan, a senior economist at Westpac, acknowledges that deterioration is "concerning and a threat to what is still only a patchy improvement in the wider economy."

"Some of the August sentiment decline may be due to one-off events, with significant developments both in China (severe flooding in northern and central China) and abroad," he says.

"However the overarching theme is still of a clear loss of confidence since earlier in the year. Chinese consumers are less convinced that business conditions are improving and look to be bracing for another hit to their finances."

Given the importance of consumption as a driver of Chinese growth in the period ahead, Hassan believes "restoring confidence will be critical to shoring up demand near term and may also be critical in ensuring a more durable recovery emerges down the track."

Read the original article on Business Insider Australia. Copyright 2016. Follow Business Insider Australia on Twitter.

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Africa's biggest economy has crashed into recession

• Will Martin
 

• 5h
• 7,979
 
• 2

Reuters/Phil Allen

Africa's largest economy, Nigeria, has officially entered recession after two consecutive quarters of contraction.

Gross domestic product shrank by 2.06% in the second quarter of 2016, following a 0.36% shrinking in the first quarter, according to data released by the country's National Bureau of Statistics on Wednesday.

Those two consecutive quarters of economic shrinkage mean the country is in its first recession in more than 20 years.

Recession in Nigeria may be an unwelcome development, but it is not unexpected. Earlier in the year, Godwin Emefiele, the governor of the Central Bank of Nigeria, warned "recession was imminent," the Financial Times reports.

"We have long warned of a slow-burning crisis in Nigeria," Capital Economics' Africa economist, John Ashbourne, said in May. "It now seems that this view was too optimistic: The country is headed into a full-blown economic crisis."

The International Monetary Fund has also warned on the state of the country's economy, forecasting that growth will shrink by 1.8% in 2016.

The big driver of the slump in the Nigerian economy, which was one of Africa's great success stories until recently, has been the persistently low price of oil over the past 2 1/2 years. Nigeria relies heavily on oil and is the largest producer of the commodity on the continent, producing roughly 2.4 million barrels a day. Given that oil's price has slumped from more than $100 a barrel in 2014 to roughly $48 now, it is perhaps unsurprising that the country has struggled to find economic growth.

The Nigerian oil industry's problems have been made even worse by a series of major disruptions in the oil-rich Niger Delta area, caused largely by a militant group calling itself the Niger Delta Avengers. Most notably, the group attacked a Chevron offshore facility in May and the underwater Forcados export pipeline operated by Shell in late March. The production disruptions caused by these attacks and others have wreaked havoc with the already stricken industry.

Dr. Yemi Kale, the CEO of the National Bureau of Statistics, tweeted to illustrate just how badly oil revenues in the country had been hit:

 Follow

Dr Yemi Kale @sgyemikale

38. Oil GDP contracted by -17.48% in Q2 2016 (due to substantial disruptions in oil production); -1.89% in Q1 2016 and -6.79% in Q2 2016.

1:10 AM - 31 Aug 2016

 
•  6363 Retweets
 
•  88 likes

Growth in non-oil sectors of the country's economy has also been badly hit, as Business Insider's Elena Holodny wrote in May, with manufacturing taking the biggest hit. Non-oil GDP contracted by 0.38% in Q2, according to a tweet by Kale. The country's decision to unpeg the naira against the dollar does not appear to have led to a hoped-for influx of dollar investment. Instead the government is now dealing with inflation.

"This is very bad news for Nigeria's government, which has justified the current FX system as a method of promoting non-oil industries," Ashbourne of Capital Economics said. "It is now clear that these policies have — as we'd long argued — made a bad situation worse."

While things look pretty bleak for the economy, research from Barclays circulated to clients on Wednesday argues that the worst of Nigeria's crisis may be over.

"Economic activity in Q3 16 continues to be hampered by security concerns in the Niger Delta, ongoing FX shortages, rising inflation and significantly tighter monetary policy. That said, the decision by militants to stop attacks, the implementation of the 2016 budget and better availability of FX, despite it remaining a massive constraint, suggests a marginally better outlook for H2," Ridle Markus argued in Barclays' "Sub-Saharan Africa Daily" note.

Markus did say, however, that "for the year as a whole, we fear that the economy is set to contract, which will be the first full-year recession since 1991."

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More: Nigeria Recession IMF Niger Delta Avengers