China’s economy suffers and UK housing market cools off in the heat
Steve Clayton, fund manager at HL Select: “A slew of Chinese data has been released showing the Asian giant’s economy lagging behind forecasters’ expectations. Industrial production, retail sales, fixed-asset investment all came in below estimates, whilst youth unemployment reached a record level of 20%. China’s central bank lowered interest rates on a series of key money-market instruments, making a reduction in the rates charged by leading Chinese banks likely when they set their monthly rates next week.
China’s economy is suffering from ongoing Covid lockdowns and a fragile property market. Developers reported lower rates of investment into new building projects whilst sales of new homes dived by 31% in the year to end-July.
In the UK, property website, Rightmove reported that asking prices in August fell by the most for two and a half years. August is a month that often sees a setback with buyers in holiday mode, but this year’s 1.3% August dip is the largest monthly drop for some while. Rightmove’s Tim Bannister said the dip was most pronounced in London and top-end properties and said indicators were pointing to a continuing cooling of the market.
Rightmove said that over the last twenty years, the average price of properties had risen by 134% to £365k, outstripping a 76% gain in average wages and a 93% rise in the RPI. In a sign of how the rising cost of living is hitting home, not least through higher interest rates, Rightmove reported that the average monthly mortgage payments for first time buyers with a 10% deposit had breached £1,000 for the first time.
Bloomberg have polled economists on their views of the prospects of growth in the Eurozone economies and found that contributors now see 60% chance of a recession in the next 12 months, up from 45% in their previous survey, and just 20% in a survey taken before the invasion of Ukraine by Russia. Inflationary pressures mean that the economists still expect the European Central Bank to continue raising rates, with a half-point rise seeming likely in September.
Phoenix Group plc has reported that half-year cash generation has risen 9% to £950m and the group now expects to hit the top end of earlier estimates for the full year of £1.3bn – £1.4bn. The group, which specialises in acquiring books of older Life Assurance policies and reducing their operational costs to release capital and earnings, says it was performing strongly, with a Solvency II surplus of 186%, above the top of its target range. New business written in the period will deliver an incremental £430m of long-term cash generation, more than double the previous year’s run-rate. The group announced a 3% dividend increase and flagged a further 2.5% increase at the full year as likely.
AstraZeneca reports that its Enhertu drug, produced jointly with Japan’s Daiichi Sankyo, had been proven to offer statistically significant and clinically meaningful progression-free survival amongst breast cancer patients with HER2-positive disease that was either inoperable or had already begun metastasising (spreading) compared to current treatments.