LONDON, Feb 7 (Reuters) – British house prices were unchanged in January after falling in month-on-month terms in each of the previous four months as borrowing costs rose, mortgage lender Halifax said on Tuesday.
The annual rate of house price growth slowed to 1.9%, the weakest increase in three years, Halifax said.
Britain’s housing market saw a surge in demand from buyers during the coronavirus pandemic but a sharp rise in interest rates over the past year and the squeeze on households’ budgets caused by high inflation has hit the momentum.
Kim Kinnaird, a director at Halifax Mortgages, said the trend of higher borrowing costs hitting demand was likely to continue in 2023.
“For those looking to get on or up the housing ladder, confidence may improve beyond the near term,” she said.
“Lower house prices and the potential for interest rates to peak below the level being anticipated last year should lead to an improvement in home-buying affordability over time.”
Latest Updates
View 2 more stories
In London, where the housing market has underperformed those of other regions of the country, prices in January were unchanged from the same month last year after rising by nearly 3% in the 12 months to December, Halifax said.
Rival mortgage lender Nationwide said last week its measure of house prices dropped by a bigger-than-expected 0.6% in January and was 3.2% below its peak in August.
As well as the Bank of England’s increases in interest rates since December 2021, there was a major disruption to the mortgage market in late September and October following former prime minister Liz Truss’s “mini budget”.
Mortgages approved in December fell to their lowest since the 2008-09 global financial crisis, excluding the start of the COVID-19 pandemic when there were strict lockdown restrictions, the BoE said last week.
Martin Beck, an economist with forecaster EY Item Club, said January’s flat-lining of prices, as recorded by Halifax, might prove only a temporary pause in a trend of falling prices.
“Although mortgage rates have dipped from post-mini-Budget peaks, they’re still at their highest in a decade,” he said.
Writing by William Schomberg; graphic by Sumanta Sen; editing by Sarah Young and Arun Koyyur
Our Standards: The Thomson Reuters Trust Principles.
Feb 1 (Reuters) – Humana Inc (HUM.N) on Wednesday beat Wall Street estimates for quarterly profit as the health insurer’s investment income jumped, even as the company reported higher-than-expected medical costs.
Humana’s fourth-quarter benefit expense ratio, or the percentage of payout on claims compared to its premiums, fell by 1 percentage point to 87.5%, but was higher than analysts’ estimate of 87.20%.
Health insurers’ costs were expected to decline on lower COVID-19-related hospitalizations, though there were concerns around a surge in flu and respiratory syncytial virus cases in the last quarter of 2022.
The respiratory season could be the primary reason behind high-than-expected benefit expense ratio, SVB Securities analyst Whit Mayo said.
Humana forecast adjusted earnings per share (EPS) of at least $28 for 2023, in line with analysts’ expectations, with Chief Executive Officer Bruce Broussard confident of achieving its 2025 adjusted EPS commitment of $37.
The health insurer said it expects to add at least 625,000 members to its Medicare Advantage plan this year.
Latest Updates
View 2 more stories
Medicare Advantage is the government-supported insurance by private companies for people over 65 years of age and has been growing at a rapid pace, outshining government-provided Medicare plans due to heavy competition among insurers for the same set of customers.
Excluding one-off items, the health insurer reported a profit of $1.62 per share, higher than analysts’ average estimate of $1.46 per share, according to Refinitiv data.
The company’s $160 million investment income was higher than Wall Street estimates of $136.7 million, Oppenheimer analyst Michael Wiederhorn said.
Humana recorded a loss of $71 million, or 12 cents per share, for the quarter due to a one-time charge of $188 million associated with its $1 billion investment plan for its Medicare business announced in February last year.
Reporting by Leroy Leo and Khushi Mandowara in Bengaluru
Editing by Vinay Dwivedi
Our Standards: The Thomson Reuters Trust Principles.
LONDON, Feb 1 (Reuters) – British house prices dropped by a bigger-than-expected 0.6% in January and are now 3.2% below their peak in August, following a surge in borrowing costs and broader inflation pressures, mortgage lender Nationwide Building Society said on Wednesday.
January’s decline in house prices was the fourth drop in a row and twice the size expected in a Reuters poll of economists, adding to signs that the market is slowing rapidly.
Interest rates have risen sharply since December 2021 and there was major disruption to the mortgage market in late September and October following former prime minister Liz Truss’s “mini budget”, which set market interest rates soaring.
“It will be hard for the market to regain much momentum in the near term as economic headwinds are set to remain strong, with real earnings likely to fall further and the labour market widely projected to weaken as the economy shrinks,” Nationwide chief economist Robert Gardner said.
Latest Updates
View 2 more stories
Nationwide forecast in December that house prices would fall 5% in 2023.
House prices in January were 1.1% higher than a year earlier, Nationwide said, the smallest year-on-year increase since June 2020 and down from a 2.8% increase in December. Economists polled by Reuters had expected a rise of 1.9%.
British house prices soared by more than a quarter during the COVID-19 pandemic, boosted by ultra-low interest rates, tax incentives and broader demand for more living space during lockdown, which was seen in other Western countries too.
However, the boom has now gone into reverse, accelerated by disruption to lending since the mini-budget.
The Bank of England reported on Tuesday that the number of mortgages approved in December fell to its lowest since the global financial crisis, excluding the very start of the COVID-19 pandemic when there were strict lockdown restrictions.
Gardner said this fall reflected a drop in mortgage applications after the mini-budget, and that it was too soon to know if the volume of house purchases would recover.
While lenders are now more willing to offer mortgages than just after the mini-budget, the BoE has steadily raised interest rates, and is expected to increase its main rate by half a percentage point to 4% on Thursday, the highest since 2008.
Reporting by David Milliken; Editing by Sarah Young and Sharon Singleton
Our Standards: The Thomson Reuters Trust Principles.
WASHINGTON, Jan 31 (Reuters) – U.S. labor costs increased at their slowest pace in a year in the fourth quarter as wage growth slowed, giving the Federal Reserve a boost in its fight against inflation.
There was more encouraging news on inflation, with other data on Tuesday showing house price growth slowing considerably in November. The reports were published as Fed officials began a two-day policy meeting. The U.S. central bank is expected to raise its policy rate by 25 basis points on Wednesday, further scaling back the pace of its interest rate increases.
“The Fed’s rate hikes in 2022 were successful at cooling an overheated economy,” said Bill Adams, chief economist at Comerica Bank in Dallas. “But policymakers want to see a wider margin of slack open up to be confident that the slower inflation in late 2022 becomes the trend.”
The Employment Cost Index, the broadest measure of labor costs, rose 1.0% last quarter, the Labor Department said. That was the smallest advance since the fourth quarter of 2021 and followed a 1.2% gain in the July-September period.
Latest Updates
View 2 more stories
Economists polled by Reuters had forecast the ECI would rise 1.1%. Labor costs increased 5.1% on a year-on-year basis after climbing 5.0% in the third quarter. They remain higher than the 3.5% that Fed officials and economists view as consistent with tame inflation. The Fed has a 2% inflation target.
The ECI is viewed by policymakers as one of the better measures of labor market slack and a predictor of core inflation because it adjusts for composition and job-quality changes.
The Fed last year raised its policy rate by 425 basis points from a near-zero level to a 4.25%-4.50% range, the highest since late 2007. Though the central bank has shifted to smaller rate increases, it is unlikely to stop tightening monetary policy.
The Fed’s “Beige Book” report this month described the labor market as “persistently tight,” noting that “wage pressures remained elevated across districts” in early January, though five regional “Reserve Banks reported that these pressures had eased somewhat.”
While annual growth in average hourly earnings in the Labor Department’s monthly employment report has cooled, wages remain high. The Atlanta Fed’s wage tracker also moderated, but stayed elevated in the fourth quarter.
Labor market tightness was underscored by a separate Conference Board report showing its consumer survey’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, increased to 36.9 in January from 34.5 in December.
This measure correlates to the unemployment rate from the Labor Department, and the rise was consistent with tight labor market conditions. The government will on Wednesday publish job openings data for December. There were 10.5 million job openings on the last business day of November.
Stocks on Wall Street were trading higher. The dollar slipped against a basket of currencies. U.S. Treasury prices were mixed.
HOUSE PRICES COOLING
“Easing labor cost growth should not be conflated with benign labor cost growth,” said Sarah House, a senior economist at Wells Fargo in Charlotte, North Carolina. “The labor market remains incredibly tight. While the deceleration in labor costs is a welcome development, it is too soon to declare that it will stay there for the long haul.”
Wages and salaries increased 1.0% in the last quarter, also the smallest gain since the fourth quarter of 2021, after rising 1.3% in the third quarter. They were up 5.1% on a year-on-year basis after rising by the same margin in the prior quarter.
Private-sector wages rose 1.0%, slowing from a 1.2% advance in the third quarter. Private industry wages increased 5.1% on a year-on-year basis after rising 5.2% in the July-September quarter.
The moderation in wage growth was more pronounced in the leisure and hospitality sector, where wages and salaries gained 0.9% after increasing 1.8% in the third quarter. Employment in this industry remains below pre-pandemic levels.
But wages in the financial activities industry shot up as did those in wholesale trade. Construction wages rose solidly.
State and local government wages climbed 1.0% last quarter after surging 2.1% in the third quarter.
Higher inflation, however, continued to eat into consumers’ purchasing power. Inflation-adjusted wages for all workers fell 1.2% on a year-on-year basis in the fourth quarter.
Benefits rose 0.8% last quarter after increasing 1.0% in the third quarter. They were up 4.9% on a year-on-year basis.
The Fed’s rate-hiking cycle, the fastest since the 1980s, is dampening house price inflation. The S&P CoreLogic Case-Shiller national home price index, covering all nine U.S. census divisions, increased 9.2% on a year-on-year basis in November, pulling back from October’s 10.7% gain.
House prices measured by the Federal Housing Finance Agency rose 8.2% in the 12 months through November after climbing 9.8% in October. A persistent shortage of homes for sale is, however, likely to prevent a sharp decline in house prices.
“A dearth of inventory, no forced selling and the back-off in mortgage rates are helping to contain the fallout,” said Robert Kavcic, a senior economist at BMO Capital Markets in Toronto.
Despite consumers’ upbeat views of the labor market, they remained gripped by fears of a recession over the next six months, with many adopting a wait-and-see attitude toward big-ticket purchases. The Conference Board’s consumer confidence index fell to 107.1 this month from 109.0 in December.
Consumers’ 12-month inflation expectations rose to 6.8% from 6.6% last month.
“We project that a moderate recession will take hold by mid-year, although the downside for this downturn should be limited by solid financial fundamentals for most households and businesses,” said Ben Ayers, senior economist at Nationwide in Columbus, Ohio.
Reporting by Lucia Mutikani; Editing by Andrew Heavens, Paul Simao and Andrea Ricci
Our Standards: The Thomson Reuters Trust Principles.
STOCKHOLM, Jan 31 (Reuters) – The effects of rising interest rates on the highly indebted commercial real estate sector is the main risk to financial stability, but a crash is unlikely, Swedish policy makers said on Tuesday.
War in Ukraine and the lingering effects of the pandemic have sparked a surge in inflation and a rapid rise in interest rates for companies – and households – that took on big debts during a decade of ultra-easy monetary policy.
Commercial property companies need to refinance around 300 billion Swedish crowns ($28.69 billion) of loans over the next couple of years. But risk appetite among banks and investors has cooled and some could face problems rolling over loans at much higher rates.
“There has been an unsustainable build up of risk in recent years and we need to see a correction,” Susanna Grufman, the acting head of the Financial Supervisory Authority, said during a hearing in parliament.
Latest Updates
View 2 more stories
“What is important from a financial stability perspective is that this (correction) doesn’t happen too fast.”
Spreads have already widened on debt issued by commercial real estate firms and some have started reducing debt by selling off parts of their portfolios.
Property companies account for around 44% of banks’ commercial lending, figures from the Riksbank showed.
The FSA reckons banks could see credit losses of up to 45 billion crowns in a sharp downturn, mainly caused by unlisted commercial property firms.
Sweden’s retail housing market is also a worry. Prices have fallen about 15% over the past year amid soaring mortgage rates and cost of living pressures.
But authorities do not expect another financial crisis like that which hit Sweden in the early 1990s when the central bank policy rate was hiked to 500%.
Over the last decade, lending regulations have been tightened and banks’ buffers against credit losses are stronger.
Authorities have better tools to deal with problems that materialize, including winding up banks that get in trouble, Karolina Ekholm, the head of Sweden’s Debt Office, said.
Furthermore, the current downturn is expected to be relatively short and mild, meaning unemployment is not expected to surge.
Nevertheless, adjustments in the commercial property sector and tumbling house prices will be a challenge for banks.
“Debts don’t go away. They need to be paid,” Riksbank Governor Erik Thedeen said. “The level of debt is a challenge and I don’t think we can exclude a pretty nasty development.”
($1 = 10.4149 Swedish crowns)
Reporting by Simon Johnson; Editing by Christina Fincher
Our Standards: The Thomson Reuters Trust Principles.
Jan 25 (Reuters) – Elevance Health Inc (ELV.N) said on Wednesday that the growth in the insurer’s commercial business is expected to keep concerns over attrition in Medicaid membership at bay, even as it forecast a weak 2023 adjusted profit.
Shares of the company rose nearly 5% as investors bet on improving margins and revenues at the commercial segment, through which it sells private insurance plans to employer groups and individuals.
The segment, which reported a profit of $260 million in the quarter, is expected to bounce back this year after its profit halved due to a hit from the pandemic.
Along with an “attractive” membership increase for its commercial plans, Stephens analyst Scott Fidel said margin improvement will also aid the insurer’s earnings in 2023.
This will likely help Elevance counter a hit to its Medicaid membership enrollments from the expected removal of pandemic-related relief measures later this year.
Several members who signed up under the COVID-19 relief measures to the government-aided insurance Medicaid plans will be deemed ineligible, beginning April 1, and will move to private or employer-backed plans.
Elevance, which was previously known as Anthem, expects total medical membership at 2023 end to range from 47.4 million to 48.5 million. Of these, total commercial memberships are expected to be between 32 million and 32.5 million.
“We anticipate growth in individual and group risk-based commercial membership… to be concentrated in the second half as consumers transition from Medicaid to commercial coverage,” Elevance’s finance chief John Gallina said on a conference call.
For the full year, Elevance expects to post more than $32.60 in adjusted profit per share, below estimates of $32.67 per share.
Elevance reported a higher-than-expected profit of $5.23 per share for the fourth quarter.
Reporting by Khushi Mandowara and Bhanvi Satija in Bengaluru; Editing by Shailesh Kuber
Our Standards: The Thomson Reuters Trust Principles.
Jan 25 (Reuters) – Most stock exchanges in the Gulf region rose in early trade on Wednesday, tracking firm global equities as stability in oil prices on expectations of fuel demand recovery in the world’s top importer China boosted sentiment.
Crude prices – a key catalyst for Gulf financial markets – rebounded on Tuesday after falling 2.3% in the prior session.
Brent crude rose 34 cents, or 0.39%, to $86.47 per barrel by 0732 GMT.
Benchmark Qatari index (.QSI) advanced 0.7%, boosted by a 10% rise in Commercial Bank (COMB.QA), its biggest intraday gain since mid-April 2021.
The Commercial bank reported more than 22% increase in full- year net profit, beating market estimates. It also hiked annual cash dividend by 56% to 0.25 riyal ($0.0666) per share from 2021.
Vodafone Qatar (VFQS.QA), which is not part of Qatari index, surged more than 5% as the telecom operator’s annual net profit grew more than 53% on account of jump in fan sim cards subcription during FIFA word cup.
Abu Dhabi’s benchmark index (.FTFADGI) added 0.2%, extending gains to a second session, as Emirates Steel (EMSTEEL.AD) jumped 1.8% and UAE’s most valued listed firm International Holding Company (IHC.AD) added 0.1%.
Dubai’s main share index (.DFMGI) edged up 0.1% on a 0.9% gain in Islamic lender Dubai Islamic Bank (DISB.DU) on strong annual net profit.
Saudi Arabia’s benchmark stock index (.TASI) dropped 0.2% and was set to snap a four-session rally as investors booked profits.
Index heavyweight oil giant Saudi Aramco (2222.SE) slipped 0.9% and Riyad Bank (1010.SE) fell 0.6%.
An OPEC+ panel is likely to endorse the producer group’s current oil output policy when it meets next week, five OPEC+ sources said on Tuesday, as hopes of higher Chinese demand driving an oil price rally are balanced by worries over inflation and a global economic slowdown.
($1 = 3.7545 riyals)
Reporting by Mohd Edrees in Bengaluru; Editing by Rashmi Aich
Our Standards: The Thomson Reuters Trust Principles.
LONDON, Jan 24 (Reuters) – Liberty Media-owned Formula One has accused FIA president Mohammed Ben Sulayem of interfering with its commercial rights by publicly questioning a reported $20 billion valuation of the sport.
Ben Sulayem, an Emirati elected in 2021 to the top job at Formula One’s governing body, took to Twitter on Monday after Bloomberg reported Saudi Arabia’s Public Investment Fund (PIF) explored a bid for more than that amount.
“As the custodians of motorsport, the FIA, as a non-profit organisation, is cautious about alleged inflated price tags of $20bn being put on F1,” Ben Sulayem said on his personal account.
“Any potential buyer is advised to apply common sense, consider the greater good of the sport and come with a clear, sustainable plan — not just a lot of money.”
He suggested the FIA had a duty to consider the possible negative impact on fans and promoters, who might have to pay more.
The comments followed his support this month for Michael Andretti’s bid to enter an 11th team on the grid — a move most existing teams are resistant to because of the dilution of revenues.
They also fuel the sense of an emerging turf war between the governing body and a commercial rights holder eager to grow an expanding and increasingly popular championship in new directions.
Sky Sports News reported that Formula One’s legal head Sacha Woodward Hill and Liberty Media counterpart Renee Wilm had sent a joint letter to the FIA accusing the governing body of exceeding its remit.
The FIA ultimately owns the rights to the championship but signed them over to former supremo Bernie Ecclestone’s Formula One Management in a 100-year deal in 2001 as part of a separation of commercial and regulatory activities.
“The FIA has given unequivocal undertakings that it will not do anything to prejudice the ownership, management and/or exploitation of those rights,” Sky quoted Formula One’s letter as saying.
“We consider that those comments, made from the FIA president’s official social media account, interfere with those rights in an unacceptable manner.”
The letter, sent to the FIA’s World Motor Sport Council, said the comments risked exposure to “serious regulatory consequences” and the FIA could also be liable.
“Any individual or organisation commenting on the value of a listed entity or its subsidiaries, especially claiming or implying possession of inside knowledge while doing so, risks causing substantial damage to the shareholders and investors of that entity,” they said.
Sources confirmed to Reuters that the details were correct and teams received copies of the letter on Tuesday from F1 chief executive Stefano Domenicali.
There was no comment from Formula One and no immediate response from the FIA.
Reporting by Alan Baldwin, editing by Christian Radnedge
Our Standards: The Thomson Reuters Trust Principles.
KAMPALA, Jan 24 (Reuters) – Uganda will commission on Tuesday the first of its four planned oil drilling rigs and start drilling the first production well, its petroleum agency said, a key milestone as the country races to meet its target of first oil output in 2025.
The East African nation discovered commercial reserves of petroleum nearly two decades ago but production has been repeatedly delayed by a lack of infrastructure like a pipeline.
“Today we mark another milestone and move a step closer to first oil with the launch of the drilling of development and production wells for the Kingfisher oil fields,” government-run Petroleum Authority of Uganda (PAU) said on Twitter.
PAU, which regulates the petroleum sector, said President Yoweri Museveni was due to officiate “at the Spudding (drilling) campaign launch” at a site in Kingfisher project area, one of the country’s two commercial oil development areas.
Kingfisher, located near the southern flank of Lake Albert in the country’s west, is operated by China’s CNOOC (0883.HK). Uganda’s second project area, Tilenga, located north of Lake Albert astride River Nile, is operated by France’s TotalEnergies (TTEF.PA).
The two firms co-own all of Uganda’s existing oilfields alongside the state-run Uganda National Oil Company (UNOC).
At peak, Uganda plans to produce about 230,000 barrels of crude oil per day.
The rig due to be launched on Tuesday, will be used to drill a total of 31 wells in Kingfisher while three rigs to be deployed later in Tilenga project area will drill a total of 426 production wells, according to the Ministry of Energy and Mineral Development.
Uganda’s crude reserves are estimated at 6.5 billion barrels, of which 1.4 billion barrels are recoverable.
The country will export its crude through an electrically heated, 1443-kilomtere pipeline from the oilfields to neighbouring Tanzania’s Indian Ocean seaport of Tanga.
Reporting by Elias Biryabarema; Editing by George Obulutsa and Rashmi Aich
Our Standards: The Thomson Reuters Trust Principles.
NEW YORK, Jan 23 (Reuters) – Goldman Sachs Group Inc’s (GS.N) asset management arm will significantly reduce the $59 billion of alternative investments that weighed on the bank’s earnings, an executive told Reuters.
The Wall Street giant plans to divest its positions over the next few years and replace some of those funds on its balance sheet with outside capital, Julian Salisbury, chief investment officer of asset and wealth management at Goldman Sachs, told Reuters in an interview.
“I would expect to see a meaningful decline from the current levels,” Salisbury said. “It’s not going to zero because we will continue to invest in and alongside funds, as opposed to individual deals on the balance sheet.”
Goldman had a dismal fourth quarter, missing Wall Street profit targets by a wide margin. Like other banks struggling as company dealmaking stalls, Goldman is letting go of more than 3,000 employees in its biggest round of job cuts since the 2008 financial crisis.
The bank will provide further details on its asset plan during Goldman Sachs’ investor day on Feb. 28, he said. Alternative assets can include private equity or real estate as opposed to traditional investments such as stocks and bonds.
EARNINGS VOLATILITY
Slimming down the investments on a bank’s balance sheet can reduce volatility in its earnings, said Mark Narron, senior director of North American banks at credit rating agency Fitch Ratings. Shedding investments also cuts the amount of so-called risk-weighted assets that are used by regulators to determine the amount of capital a bank must hold, he said.
Goldman Sachs’ asset and wealth management posted a 39% decline in net revenue to $13.4 billion in 2022, with its revenue from equity and debt investments sinking 93% and 63%, respectively, according to its earnings announced last week.
The $59 billion of alternative investments held on the balance sheet fell from $68 billion a year earlier, the results showed. The positions included $15 billion in equity investments, $19 billion in loans and $12 billion in debt securities, alongside other investments.
“Obviously, the environment for exiting assets was much slower in the back half of the year, which meant we were able to realize less gains on the portfolio compared to 2021,” Salisbury said.
If the environment improves for asset sales, Salisbury said he expected to see “a faster decline in the legacy balance sheet investments.”
“If we would have a couple of normalized years, you’d see the reduction happening,” in that period, he said.
PRIVATE CREDIT
Clients are showing keen interest in private credit given sluggish capital markets, Salisbury said.
“Private credit is interesting to people because the returns available are attractive,” he said. “Investors like the idea of owning something a little more defensive but high yielding in the current economic environment.”
Goldman Sachs’ asset management arm closed a $15.2 billion fund earlier this month to make junior debt investments in private equity-backed businesses.
Private credit assets across the industry have more than doubled to over $1 trillion since 2015, according to data provider Preqin.
Investors are also showing interest in private equity funds and are looking to buy positions in the secondary market when existing investors sell their stakes, Salisbury said.
The U.S. investment-grade primary bond market kicked off 2023 with a flurry of new deals.
The market rally has “more legs” because investors are willing to buy bonds with longer maturities while seeking higher credit quality because of the uncertain economic environment, he said.
Goldman Sachs economists expect the Federal Reserve to raise interest rates by 25 basis points each in February, March and May, then holding steady for the rest of the year, Salisbury said.
More broadly, the “chilling effect” of last year’s rate hikes is starting to cool economic activity, Salisbury said, citing softer hiring activity and slowing growth in rents.
Reporting by Saeed Azhar; Editing by Megan Davies, Lananh Nguyen and Lisa Shumaker
Our Standards: The Thomson Reuters Trust Principles.