The FTSE 100 (^FTSE) advanced on Monday while European stocks were muted as the Japanese yen fluctuated wildly overnight.
The currency surged after hitting a fresh 34-year low against the dollar, fuelling speculation that Japanese authorities may have intervened to support the currency for the first time since late 2022.
It slipped to 160.17 against the US greenback in volatile morning trade, with liquidity thin amid a holiday in Japan. The fall stirred speculation that authorities would intervene to arrest its slide.
It later bounced back to 155.05, with investors were weighing the prospect that officials would step in to financial markets.
The currency has come under renewed pressure after the Bank of Japan (BoJ) kept interest rates on hold and refused to tighten monetary policy further at its meeting last week.
“The FTSE 100 has clearly had its Ready Brek as the blue-chip index continues to glow and sustain energy that we haven’t seen in the UK market for a long time,” Russ Mould, investment director at AJ Bell, said.
“Shifting higher, it means the FTSE 100’s year-to-date performance (+5.7%) is now better than the Nasdaq 100 in the US (+5.3%), the S&P BSE 100 in India (+5.2%) and the CSI 300 in China (+4.5%).”
He added: “So much for the FTSE’s reputation of being a home for boring, outdated companies.”
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Ireland returns to growth
Des Moines, Iowa, USA – Mar 16, 2024: St Patrick Parade in Des Moines Iowa (Ganeshkumar Durai) Ireland’s annual inflation rate slowed to 1.6% in April, down from 1.7% the month before, new data has shown.
Meanwhile, first-quarter gross domestic product (GDP) increased 1.1% quarter-on-quarter, after shrinking slightly in the second half of last year.
The government has long cautioned against using GDP to accurately measure economic growth as it is routinely impacted by multinational activity. Its preferred measure, modified domestic demand, is not included in the flash estimates.
Analysts at Investec say:
“Recent revisions now mean that the Eurozone was in a technical recession in H2, albeit by the slimmest of margins. Given that economic data at the start of 2024 has been more positive, we expect the Eurozone exited that recession in Q1, with a 0.1% quarterly expansion in output.
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Oil prices fall
Ocean offshore oil rig drilling platform off near wooded shore of Stavanger, Norway. (Pavel Losevsky) Oil prices have slipped today with Brent crude, the international benchmark, down 0.6% to below $89 a barrel after gaining 2.5pc last week. Meanwhile West Texas Intermediate dropped 0.4% towards $83.
It comes as US Secretary of State Antony Blinken is expected to step up efforts to secure a truce in Gaza during a visit to the region.
Ricardo Evangelista, senior analyst at ActivTrades, said:
Brent oil prices fell in early Monday trading as the market assessed reports of peace talks between Israel and Hamas.
This development offers a glimmer of hope for de-escalating the conflict, thereby lessening the risk of its regional expansion.
“The spectre of a full-scale war in the Middle East, which could disrupt crude exports from one of the world’s primary producing regions, has been the main driving force behind recent oil price increases.”
“Traders may begin factoring in these expectations of de-escalation in Gaza, which could exert downward pressure on prices.”
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Public could benefit from £30bn a year windfall from digital pound
Image of graphs over pound and black background. Finance, economy and currency concept digitally generated image. (VectorFusionArt) The government could see its fiscal space increased by £30bn a year by the end of the decade if it goes ahead with plans for a digital pound.
This is according to new analysis from research and campaign group Positive Money.
As a new publicly-issued form of money, a digital pound would allow the public to recapture ‘seigniorage’ – the profits from issuing money, it said.
Like with banknotes, the publicly-owned Bank of England would generate seigniorage revenue from issuing a non-interest bearing digital pound in exchange for interest-bearing assets, with profits transferred to the Treasury.
With the introduction of a digital pound expected by the end of the decade, Positive Money calculates that by 2029 the government could be set to gain between around £15bn a year in lower adoption scenarios, where 20% of bank deposits are switched to a digital pound, and upwards of £30bn a year in higher adoption scenarios, where 30% of deposits are switched to a digital pound.
Simon Youel, author of the research and head of policy and advocacy at Positive Money, said:
“While politicians often claim there is ‘no money’ for increased public spending, the government looks set to receive a significant windfall from the introduction of a digital pound in the coming years, which doesn’t seem to have yet factored into debates over ‘fiscal headroom’.
“The government would have to decide how this money is used. Though gains from a digital pound could be simply used to cut taxes or increase day-to-day spending, the most impact could perhaps be achieved by investing funds in the UK’s long-term economic development through a national development bank, which could channel finance towards a just green transition.”
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Frasers launches new share buyback
Sports Direct and House of Fraser owner Mike Ashley outside the Rolls Building in central London, where Frasers Group is taking legal action against American financial giant Morgan Stanley and the Danish Saxo Bank over the May 2021 move linked to options over shares in the German retailer Hugo Boss. Picture date: Friday February 23, 2024. (Lucy North, PA Images) Frasers Group (FRAS.L) has risen 2% today after announcing a new buyback programme. It plans to buy back £80m worth of shares in a bid to reduce the share capital of the company.
The group, which is largely owned by retail retail tycoon Mike Ashley, and which owns the likes of Sports Direct, will buy as many as 10 million of its shares.
Deutsche Bank (DB) initiated coverage of the stock with a “Buy” recommendation and 1000p target price.
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UK house prices climb over £5,000 driven by demand for smaller homes
UK house prices experienced a growth of 1.9% in February, indicating a £5,318 increase over the past year. This means properties are now only £7,801 shy of the peak observed in August 2022.
Demand among buyers for smaller homes helped to drive growth in UK property prices in the early months of this year, according to Halifax.
Flats and terraced houses made up for 57% of all homes purchased by first-time buyers last year. However, this varies by region. For example in London, which has the highest average property price in the UK by some margin, flats and terraced homes account for 90% of all first-time buyer purchases.
Flats prices rose most quickly at the start of the year than any type of property.
Annual growth reached 2.7% in February, or £4,290 up over the last year. The average price paid of £163,016 is just £5,551 below the peak price recorded for flats in August 2022.
Alice Haine, personal finance analyst at Bestinvest, said:
“This could signal that the race for space is over, reflecting the toll high living costs and high interest rates have taken on buyers’ affordability levels.
“With interest rates holding at 5.25% since August last year and inflation, although easing now, remaining high throughout 2023, people found their mortgage affordability levels severely constrained.”
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