Rate rise?
Not yet
The governor of the Bank of England this week signalled in a speech to the Trades Union Congress that interest rate rises are on the way, but hinted that such a move is not likely until the beginning of spring next year, rather than the end of this year as some analysts had expected. He also said he expects real wage growth to resume next year with inflation remaining under control. Mr Carney also took the opportunity to remind secessionist Scots that a currency union between an independent Scotland and the UK would be "incompatible with sovereignty".
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Housing crunch
Chronic shortage
The latest poll of housing prices, from mortgage lender the Halifax, suggests that house prices stalled in August, but this could be down to the usual summer lull and the effect of mortgage market restrictions rather than the beginning of a reversal. Indeed, the Confederation of British Industry this week warned that a 'perfect storm' was building in the housing market due to a continued chronic undersupply of housing which, it calculates, is costing consumers £4bn a year due to inflated house prices. It called for the development of 10 new towns and garden cities by 2025 to ease the pressure.
UK deficit widens
Imports up
The UK’s trade deficit widened unexpectedly in July, dealing a blow to government hope of rebalancing the economy. Contrary to expectations that the gap between imports and exports would narrow to £9.1bn it actually grew to £10.2bn, up from £9.4bn in June. Imports rose by £1.3bn to £34.2bn compared with a £500m rise in exports, which was the first increase in exports for four months. Of more succour to the government was an estimate this week from the thinktank the National Institute of Economic and Social Research which estimated that UK GDP grew by 0.6 per cent in the three months to August, taking annual growth to 2.9 per cent.
East Coast profits
Up again
The government-run East Coast mainline has grown profits again in the most recent trading period. Directly Operated Railways, which took over the line from private operator National Express in 2009, grew ticket sales by 4.5 per cent in the past year with turnover rising from £693.8m to £720m and premiums and profits delivered to the Treasury rose from £202.8m to £225.3m. The news will further embolden the Trade Unions who are demanding that the government keep the franchise in house rather than tender it back out to the private sector next March, as planned.
On the road
Alibaba IPO
Chinese e-commerce giant Alibaba has commenced its investor roadshow in the US as it enters the final stages of what could turn out to be one of the biggest IPOs in history. The company, which dominates China’s e-commerce landscape with a market share said to be as high as 80 per cent of all transactions, is seeking a US listing later this month in which it is looking to raise $21.1bn, giving it a market capitalisation in the region of $160bn (£99.02bn). The biggest previous IPO on record is Agricultural Bank of China, which raised $22bn in 2010. Pricing is scheduled for 18 September with trading expected to begin the following day.
Bond success
A2 offer closes
Social and affordable housing developer A2Dominion this week opened and closed a retail bond offer in the space of 24 hours, with the company seeking to raise £150m from the process. Demand was clearly strong for an offer which was originally meant to be open for two weeks, illustrating the continued desire for secure income and providing a filip for the London Stock Exchange's ORB retail bond trading platform after a quiet period for issues. The 12-year bond, dated 2026, will pay a coupon of 4.5 per cent. A2Dominion previously raised £150m from a bond issue last October.
