European stock markets spent most of Wednesday muted as UK house prices rose in January and traders awaited the latest interest rate decision from the Federal Reserve.
The FTSE 100 (^FTSE) was trading 0.1% lower by the end of the day in London, while the CAC (^FCHI) lost 0.1% in Paris, slipping from its record high, and the Frankfurt DAX (^GDAXI) was 0.3% down.
“Ricardo Evangelista, senior analyst at ActivTrades, said: “Traders find themselves in a wait-and-see mode in anticipation of the Federal Reserve’s rates announcement and subsequent press conference, both scheduled for later today.
“While the consensus amongst analysts leans towards unchanged interest rates, uncertainties persist regarding the hints that may surface in the policy statement and during the press conference.”
It came as Nationwide’s House Price Index showed there was a slight improvement in the annual rate of house price growth in the UK, from -1.8% in December to -0.2% in January.
Prices ticked up 0.7% to an average of £257,656 as pressures on mortgage rates eased, following an optimistic shift in how investors view the Bank of England‘s potential interest rate path, the building society said.
Robert Gardner, Nationwide’s chief economist, said: “While a rapid rebound in activity or house prices in 2024 appears unlikely, the outlook is looking a little more positive.”
Read more: Trending tickers: Google, Microsoft, Vodafone, GSK
Across the pond, US markets were also in the red, with the Nasdaq 100 (^IXIC) sliding back 1.4%, the S&P 500 (^GSPC) 0.8% down by the time of the European close, and the Dow (^DJI) trading flat.
It came as private sector hiring in the US fell more than expected this month. There were 107,000 added jobs in the private sector, according to data from payroll business ADP, a slowdown from a revised 158,000 in December.
Most of the job gains were in service-providing sectors including leisure and hospitality and trade, transport and utilities.
Michael Hewson of CMC Markets said: “Having seen the ECB keep rates on hold last week, today is the turn of the Federal Reserve where we could see the central bank look to put a pin in the idea that a March rate cut is coming. That’s not to say the Fed will rule the idea of rate cuts coming, simply that March is too soon for a data dependant central bank.”
Futures expect 150bps of cuts from the Fed this year.
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Majority of rental market unaffordable for under-30s
VITA student accommodation high rise block, Cardiff city centre. Taken September 2023 (Nia Bell) New research by tenancy deposit alternative Zero Deposit has revealed that under-30s face an “almost impossible” task when it comes to current rental affordability, with just 7% of the market classed as affordable when it comes to the cost of a rental deposit coupled with their first month’s rent.
Zero Deposit analysed average monthly rent prices in each of the UK’s 361 local authority areas, and average incomes of each age bracket or renters.
Zero Deposit then looked at what percentage of local authorities were realistic when it came to rental market affordability, based on 50% of the average renter’s monthly income in relation to the combined cost of an upfront five week deposit and the first month’s rent.
The research shows that: –
The cost of rent
The high cost of renting is no secret and currently, the average UK rent comes in at £921 per month. London and the South East have the most expensive regional averages, standing at £1,873 per month and £1,148 per month respectively, while at local authority level, the monthly cost of renting in the City of Westminster is an eye-watering £3,154 – the highest in the UK.
Upfront deposit creates a larger financial obstacle
But it’s not just the high cost of monthly rent that poses a financial obstacle to tenants. There’s also the upfront cost of a deposit to take into account, which stands at £1,063 at five weeks for the average UK rental property.
With this cost often coming within the same month as the first month’s rent is due, that’s a total of £1,913 required for the average UK tenant to secure a rental property.
With the average UK salary coming in at £2,950 per month, the cost of securing a rental property is out of reach for the average UK tenant based on their entire monthly income, let alone a 50% allowance of £1,475.
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IKEA to open new stores amid strong UK profits
An IKEA store is seen in the hamlet of Hicksville in Nassau County, Long Island, New York. (SOPA Images, SOPA Images Limited) Profits at IKEA’s UK division more than doubled in the last financial year as looks to open new stores in the country.
The retailer posted sales of £2.46bn for the year to August, up from £2.20bn, while its operating profits surged from £49.6m to £111.2m.
It also saw 19% growth in online sales and a 24% increase in remote sales.
There was also a 48% rise in click and collect purchases while new city stores were announced for London’s Oxford Street and Brighton.
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Bank of England expected to leave interest rates on hold
The Bank of England is widely expected to leave interest rates at a 15-year high of 5.25% for a fourth straight month when it meets on Thursday.
The BoE’s Policy Committee will announce its latest decision at noon tomorrow and markets are predicting a 98% chance that interest rates will be held at the highest level since 2008.
Officials at Threadneedle Street have cautioned that it is “too early” to talk about cutting interest rates but, despite a small uptick in December, UK inflation has come in much lower than predicted and now stands at 4%. In November 2022, it peaked at 11.1% amid surging energy prices.
The Bank will be watching other measures of underlying inflation, such as core inflation which strips out the impact of food and energy prices to make their decision.
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How to prepare your pension to live to 100
Recent figures revealed there were over half a million people in the UK aged 90 or over in 2022 and more than 15,000 people aged 100 or more. This number has doubled in 20 years. The ranks of centenarians are still dominated by women, but men are catching up. Twenty years ago, there were 8.2 women over 100 to every man: now it’s 4.5.
It means that despite all the health challenges thrown at us in recent years, we’re defying them all, and men and women are living to a ripe old age. This is largely exceptionally good news. Who doesn’t want to live longer? However, it comes with a sting in the tail.
Despite life expectancy growing, the period of our lives we’re expected to remain healthy for has shrunk since 2015. A baby boy currently has a healthy life expectancy of 63 years, and a baby girl 64 years. It means we need to make plans not just for a longer life, but one where we might not be in brilliant health for a major part of it.
At the same time, because we’re living longer, the government has been increasing the state pension age, and is expected to keep doing so.
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Judge blocks $56bn Tesla pay deal
Elon Musk, CEO of Tesla (zz/Michael Germana/STAR MAX/IPx, Associated Press) A judge in Delaware has annulled a $55.8bn (£44bn) pay deal awarded to Elon Musk in 2018 by electric car company Tesla.
Judge Kathaleen McCormick said the payout was “an unfathomable sum” that was not fair to shareholders. The lawsuit was filed by a shareholder who argued that it was an overpayment.
The pay deal was the biggest ever in corporate history, helping to make Mr Musk one the richest people in the world.
If the decision survives an appeal, the Tesla board will have to come up with a new compensation package for Musk.
“Never incorporate your company in the state of Delaware,” Musk said on X, formerly known as Twitter.
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Watch: How does inflation affect interest rates?
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