BBC News - UK house prices see highest growth in six years in 2020

 

UK house prices climbed 7.5% in 2020, the highest growth rate for six years, building society Nationwide found.

Prices ended the year 5.3% above the level prevailing in March, a resilience that seemed unlikely at the start of the pandemic, it said.

Housing demand has been buoyed by a raft of policy measures and changing preferences due to the pandemic.

House prices were 0.8% higher in December than November, with the average property valued at £230,920.

"The furlough and Self Employment Income Support schemes provided vital support for the labour market, while a host of measures helped to keep down the cost of borrowing and keep the supply of credit flowing," said Robert Gardner, Nationwide's chief economist.

Mr Gardner said the stamp duty holiday also stimulated demand, by bringing forward peoples' home-moving plans.

Lenders also responded by offering payment holidays to borrowers impacted by the pandemic, helping people stay in their homes rather than potentially being forced to sell.

Tailwinds

"The year has ended with a bang and not a whimper," said Lucy Pendleton, property expert at independent estate agents James Pendleton.

"There are still plenty of buyers out there competing with each other for bigger and better properties, and detached homes continue to outperform."

She said that is continuing to spur high house price growth even though buyers know they are likely to miss out on the stamp duty tax break, as conveyancing is still taking a relatively long time.

"There are several tailwinds and the housing market is making the most of them," said Mark Harris, chief executive of mortgage broker SPF Private Clients.

He said buyers require more space - both inside and out for the family and to work from home - and are keen to take advantage of the stamp duty holiday if they can.

"Competitive mortgage rates show no sign of disappearing anytime soon, with lenders most notably returning to the 90% loan-to-value space, providing a further boost for first-time buyers."

Where next for house prices?

The outlook remains "highly uncertain," reckons Mr Gardner.

"Much will depend on how the pandemic and the measures to contain it evolve as well as the efficacy of policy measures implemented to limit the damage to the wider economy."

He said that behavioural shifts as a result of Covid-19 may continue to provide support for housing market activity.

Meanwhile the stamp duty holiday will continue to provide a near-term boost by bringing forward home moves.

"The Stamp Duty time limit is creating a false horizon, which will see prices rise even higher in the first quarter of next year," said George Franks, co-founder of London-based estate agents Radstock Property.

"Though rising unemployment levels are an obvious threat to property values, demand should remain relatively strong as it still costs less to own than to rent and money is about as cheap as it gets."

He predicted that during 2021, people will continue to change their living arrangements as companies adapt their remote working policies on a more formal basis.

"However, housing market activity is likely to slow in the coming quarters, perhaps sharply, if the labour market weakens as most analysts expect, especially once the stamp duty holiday expires at the end of March," he warned.

Mr Franks agreed. "After a strong first quarter of 2021, prices are likely to cool in the wake of the Stamp Duty deadline but could then start to increase again towards the end of the year," he said.

"Though the Treasury has confirmed the Stamp Duty deadline of March 31 will stand, this government has backtracked and U-turned so many times that frankly anything is possible."

Reuters News - Wall St opens higher on hopes of vaccine-fueled recovery

 (Reuters) - U.S. stocks opened higher on Wednesday as investors hoped that COVID-19 vaccine rollouts and a bigger fiscal aid would help the world’s largest economy recover from a pandemic-fueled slump in 2021.

The Dow Jones Industrial Average rose 79.42 points, or 0.26%, at the open to 30,415.09. The S&P 500 opened higher by 9.15 points, or 0.25%, at 3,736.19, while the Nasdaq Composite gained 56.29 points, or 0.44%, to 12,906.51 at the opening bell.

Reporting by Devik Jain in Bengaluru; Editing by Sriraj Kalluvila

Our Standards: The Thomson Reuters Trust Principles.

BBC News - China and EU 'on verge' of major investment deal

 

The EU and China are close to reaching a long-awaited business investment deal, according to media reports.

The pact, expected to be finalised this week, will give EU firms better access to the Chinese market and improve competition conditions.

Talks on the investment deal began in 2014 but have been stuck for years over a number of issues.

But rising trade tensions between the US and China may have helped change the Chinese position, officials said.

The deal comes hot on the heels of the UK's post-Brexit trade agreement with the EU which was announced on 24 December.

• UK set for 'bumpy' period as new EU rules come in
• Chinese economy 'to overtake US by 2028'
• US blacklists companies with possible military ties

According to multiple reports, the deal would open up China's manufacturing sector to EU companies, as well as construction, advertising, air transport and telecoms.

One of the sticking points was China's demands for access to the EU's energy market given sensitivities over national security. The deal is expected to give Beijing access to a small part of the European renewable energy sector on a reciprocal basis.

The pact is also designed to remove barriers to investment in China such as joint-venture requirements and caps on foreign ownership in certain industries.

Once the expected deal is reached, it needs to be ratified by the European parliament, a process that may not begin until the second half of 2021.

Hard labour

On Monday, the European Commission reported progress on the talks with Beijing, including the core issue of workers' rights in China.

This is a contentious issue given reports that China uses Uighur Muslims detained in large numbers in the Xinjiang province as forced labour. Beijing denies these claims.

Under the agreement, China is being asked to pledge to subscribe to the International Labour Organisation's rules on forced labour.An EU-China agreement is expected to cause frictions with the incoming administration of US president-elect Joe Biden.Earlier this month the EU published a transatlantic strategy in which it urged the US to work with it to meet the "strategic challenge" posed by China.

China and the US have been locked in a trade war since 2018 and the Trump administration has targeted a number of Chinese tech companies as threats to national security.EU-China relations themselves have been strained this year, over China's imposition of a new security law in Hong Kong and accusations it spread disinformation about the coronavirus.

Reuters News - Wall St at record levels after Trump signs fiscal aid bill

 (Reuters) -Wall Street’s main indexes were trading at record levels on Monday as President Donald Trump’s signing of a long-awaited $2.3 trillion pandemic aid bill bolstered bets on an economic recovery.

In a sudden reversal late on Sunday, Trump backed down from his threat to block the hard-fought bill, restoring unemployment benefits to millions of Americans and averted a federal government shutdown.

“The passage of the stimulus bill is erasing some fears and investors are relieved that there is help out there,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

The S&P 1500 airlines index added 1.5% as carriers are set to receive $15 billion in addition payroll assistance under the new government aid.

Cruise operators Royal Caribbean Cruises Ltd, Carnival Corp and Norwegian Cruise Line Holdings Ltd also rose between 3% and 5%.

Ten of the 11 major S&P sectors were higher with technology, consumer services and consumer discretionary posting the biggest gains.

After a sharp recovery from a coronavirus crash in March, the S&P 500 is on track to rise more than 15% this year on the back of a loose monetary policy, high liquidity and a COVID-19 vaccine program.

However, near-term outlook for equities remain clouded on worries over a resurgence in coronavirus pandemic, mixed economic data and upcoming U.S. Senate runoffs in Georgia.

Trading volumes are expected to be thin in the final week of the year that has historically been a seasonally strong period for equities.

At 11:46 a.m. ET, the Dow Jones Industrial Average rose 237.05 points, or 0.78%, to 30,437.00 the S&P 500 gained 31.32 points, or 0.85%, to 3,734.49 and the Nasdaq Composite gained 96.52 points, or 0.76%, to 12,901.82.

Democrats in the U.S. Congress on Monday will put to vote a proposal for higher pandemic relief payments for Americans, although it appears unlikely to gain traction in the Republican-controlled Senate.

Fueling a global appetite for risk, Britain and the European Union clinched a lean post-Brexit trade deal on Thursday, while the launch of a mass COVID-19 vaccination drive in Europe over the weekend added to the upbeat mood.

Tesla Inc rose 1.3% after a report that the electric-car maker will start operations in India early next year.

Netflix Inc, Peloton Interactive Inc and Zoom Video Communications Inc, which have outperformed throughout the health crisis, slipped between 0.1% and 5%.

Lockheed Martin Corp rose 0.1% after the fighter jet maker said it delivered 123 F-35 jets in 2020, near the top end of its revised outlook.

Advancing issues outnumbered decliners by a 1.7-to-1 ratio on the NYSE and by a 1.4-to-1 ratio on the Nasdaq.

The S&P 500 posted 31 new 52-week highs and no new lows, while the Nasdaq recorded 392 new highs and 14 new lows.

Reporting by Devik Jain and Supriya R in Bengaluru; Editing by Anil D’Silva and Maju Samuel

Our Standards: The Thomson Reuters Trust Principles.

BBC News - UK borrowing hits highest November level on record

 

Government borrowing soared in November as the UK continued to support the economy during the coronavirus pandemic.

The Office for National Statistics said borrowing hit £31.6bn last month, the highest November figure on record.

It was also the third-highest figure in any month since records began in 1993.

The figures highlight the government's spending-revenue gap, and underline Chancellor Rishi Sunak's problems as he weighs up bolstering Treasury coffers.

Since the beginning of the financial year in April, borrowing has reached £240.9bn, £188.6bn more than a year ago, the ONS said.

A Budget had been expected to take place in autumn this year, but it was delayed because of the pandemic and will now take place on 3 March 2021.

The independent Office for Budget Responsibility (OBR) has estimated that borrowing could reach £372.2bn by the end of the financial year in March.

However, Mr Sunak made clear on Tuesday that he would not be taking any hasty action. "When our economy recovers, it's right that we take the necessary steps to put the public finances on a more sustainable footing so we are able to respond to future crises in the way we have done this year," he said.

Mr Sunak has already imposed a pay freeze on at least 1.3 million public sector workers as part of efforts to contain government spending.

The increase in borrowing has led to a steep increase in the national debt, which now stands at just under £2.1 trillion.

The UK's overall debt has now reached 99.5% of gross domestic product (GDP) - a level not seen since the early 1960s.

Where does the government borrow?

The government borrows in the financial markets, by selling bonds.

A bond is a promise to make payments to whoever holds it on certain dates. There is a large payment on the final date - in effect, the repayment.

The buyers of these bonds, or "gilts", are mainly financial institutions, like pension funds, investment funds, banks and insurance companies. Private savers also buy some.

You can read more here about how countries borrow money.

"We are looking at the highest peacetime deficit and if we look at where the country's debt is, then we are at the highest levels since the 1960s," said Sarah Hewin, chief economist at Standard Chartered.

"In November alone, borrowing was about six times what it was in November last year, so these are some absolutely record numbers that we are seeing.

"Also, of course, the furlough scheme has been extended, so that will increase government spending. We could well see the deficit for the financial year all the way up to 20% of GDP, so around £400bn."

Separately, the ONS has also revised its figures for the UK's economic growth this year.

The economy shrank a little less in the April-to-June period than previously indicated, by 18.8% instead of 19.8%.

And the rebound from July to September was a little bigger, with growth of 16% instead of 15.5%.

Ruth Gregory, senior UK economist at Capital Economics, said a double-dip recession was a clear possibility if the tier four Covid-19 restrictions were extended into 2021.

However, she said there was optimism that as long as vaccines were effective and widespread, GDP would "stage a strong rebound" in the second half of next year.

Double-dip recession?

The extraordinary pandemic shutdown borrowing numbers had begun to recover. But last month, as some restrictions were reapplied across the UK, the government borrowed £31.6bn, the third-highest month on record.

This was £26bn higher than last November, driven mainly by a £23bn increase in government spending on a year ago, including the reapplication of the full jobs wage subsidy furlough scheme.

Borrowing so far this financial year since April is already at a record £240bn and set to hit about £400bn over the full year.

Growth in the economy in the third quarter was a little higher than first calculated, at a record 16%, but that now is firmly old news.

The likely spread of new restrictions on retail and hospitality and multiple forms of chaos at ports mean forecasters fear the UK may already be back in a double-dip recession

Reuters News - Trump signs stopgap funding bill; Congress awaits his approval of $892 billion COVID aid

 WASHINGTON (Reuters) -President Donald Trump on Tuesday signed a stopgap measure to fund U.S. agencies for another week while Congress passed a massive COVID-19 aid and government funding package overnight aimed at bolstering the nation’s pandemic response and its battered economy.

The package includes $892 billion for coronavirus relief plus federal government funding to also avert a government shutdown - together worth about $2.3 trillion in spending for the rest of the fiscal year that ends next Sept. 30 - and is awaiting Trump’s approval to become law.

In the meantime, U.S. lawmakers moved to fund federal agencies through Dec. 28 to prevent a lapse in government operations. Trump signed the stopgap funding bill into law on Tuesday, the White House said.

The COVID-19 provisions aim to throw a lifeline to the U.S. economy after months of inaction as the novel coronavirus outbreak continues to swell nationwide, with more than 214,000 people infected every day. So far, more than 319,000 Americans have died.

The wide-ranging bill includes $600 payments to most Americans and additional money to the millions of people thrown out of work during the COVID-19 pandemic, just as earlier benefits expire on Saturday.

Still, various advocacy groups and others said that while the new round of aid was welcomed, it was far from enough to help Americans who have been struggling for months and comes too late for many. They called on President-elect Joe Biden to do more once he takes office on Jan. 20.

As part of a compromise, lawmakers left out additional Democratic-backed funds for states and cities as well as Republican-backed corporate liability protections. It also excluded COVID-19 related paid leave, among other provisions.

“It’s good news that relief is on the way for American families, small businesses, and the unemployed. But it is simply not good enough,” U.S. Conference of Mayors President and Louisville Mayor Greg Fischer said in a statement.

U.S. Treasury Secretary Steven Mnuchin has said $600 direct payment checks could be sent to people as soon as next week.

Editing by Susan Heavey and Steve Orlofsky

Our Standards: The Thomson Reuters Trust Principles.

BBC News - FTSE and pound fall as European borders close to UK

 

Shares in London have fallen sharply and the pound has lost ground after several EU countries closed their borders to the UK, which has reported a new variant of coronavirus.

The FTSE 100 share index fell about 3%, while the main markets in Germany and France were nearly 4% lower.

Sterling fell more than 1% against the euro and dropped 2% against the dollar.

Restrictions on travel hit airline stocks, with British Airways' owner IAG and EasyJet tumbling more than 11%.

Aircraft engine maker Rolls-Royce was also badly hit, falling 10%.

The rout was replicated on other European markets. Air France-KLM shares dropped 7%, while planemaker Airbus fell 6.5%.

"Investors' rosy expectations for 2021 have suddenly vanished," said Kazuhiko Saito, chief analyst at commodities broker Fujitomi Co.

As well as renewed concern about Covid-19 cases in the UK, investors were reacting to another missed deadline in trade talks with the EU.

London and Brussels are trying to reach a trade deal before the Brexit transition period ends on 31 December.

The talks are set to continue on Monday between negotiators.

• UK calls emergency meeting as Europe shuts doors
• Brexit trade talks to continue at 'crucial moment'

The stalled negotiations have been partly responsible for the pound fluctuating over recent weeks. Optimism that a deal would be struck had triggered a four-day winning streak for sterling, pushing it back up to just under $1.36 before it reversed course again.

On Monday, the pound fell towards $1.32, with the dollar also being buoyed after a $900bn plan to help the US economy weather the coronavirus pandemic was agreed.

Lockdown blues

European nations have begun to impose travel bans on the UK after it reported a more-infectious and "out of control" coronavirus variant over the weekend.

Ireland, Germany, France, Italy, the Netherlands and Belgium are all halting flights.

On Saturday, UK Prime Minister Boris Johnson introduced a new tier four level of restrictions for London and South East England.

"The lockdown news and the stalemate on Brexit is keeping the market nervous," National Australia Bank's senior currency strategist Rodrigo Catril told Reuters.

The prime minister will chair a meeting of the government's emergency committee later after France closed its border with the UK for 48 hours.

Sticking points

One major sticking point in the Brexit talks is access to the UK's water for fishing. While the fishing industry accounts for just 0.1% of gross domestic product, (GDP) it is of high political significance.

If a trade agreement is not reached by the end of the month, British firms will revert to trading with the EU under rules established by the World Trade Organization (WTO).

This will mean imports and exports to the EU would be subject to WTO-negotiated tariffs, essentially a tax on goods.

Currency experts have warned that the pound could fall to $1.25 by the middle of next year if no trade agreement is agreed.