Inflation dips
BoE wriggle room
Inflation in the UK took a surprise downwards turn in the year to April with the Consumer Price Index falling to 2.4 per cent from 2.8 per cent the previous month, a sharply decline than was expected. Fuel costs were the main contributor as the price of petrol at the pump subsided, with more to come next month, but food and drink costs continued to rise and held back what would have been an even bigger fall. The first fall in the rate of inflation since September will give the incoming governor of the Bank of England, Mark Carney, more room for monetary manoeuvre when he takes up the reins next month, but some commentators are forecasting a return to rising inflation later this year.
Posting profits
Royal Mail delivers
In what could be its final full-year results before a predicted flotation, the Royal Mail postage service reported a 60 per cent rise in pre-tax profits to £324m. A 30 per cent increase in the price of stamps during the past year has fed through into sales of £9.3bn, up by more than £500m. With a part-privatisation of the service rumoured to be on the cards for later this year, the business is reorganising to concentrate further on the more lucrative packages delivery business, but management has reiterated the long-standing commitment to deliver to every address in the UK six days a week, a service which can only be altered by a vote in parliament.
Old meets new
Yahoo/Tumblr deal
One of the internet's longest-standing names, Yahoo, has acquired one of its newest growth stories in the form of blogging platform Tumblr in a $1.1m deal. Notably, Tumblr's founder David Karp was only eight years old when Yahoo was founded 18 years ago. The deal represents a leap of faith by Yahoo chief executive Marissa Mayer that combining Yahoo and Tumblr can bring a wider audience into the Yahoo network amid claims it will increase monthly visitors to Yahoo by 50 per cent and traffic by 20 per cent, Yahoo also claimed it sees significant opportunities for increased advertising revenues as it seeks to fight back against fast moving rivals.
EU implosion?
Letta warning
Investors have blissfully ignored the ongoing troubles in the economies on the southern periphery of the eurozone during the recent market rally, but economic data continues to tell a tale of woe. And a backlash is building against the stringent austerity policies which have wrapped the periphery in a vice-like grip and stifled growth. Indeed, this week the Italian prime minister Enrico Letta warned European leaders that voters are likely to rise up and reject the European Union if conditions remain so hopeless. He said: "The EU cannot keep going as it has up to today, with timidness or a lack of decisions. Either it accelerates or it risks imploding." Incoming Bank of England governor Mark Carney added his thoughts to the debate this week, warning Europe it faces a "lost decade" if it continues to pursue austerity at all costs.
Mortgage rise
Four-year high
The latest data from the Council for Mortgage Lenders lent further credence to the theory that the UK housing market is beginning to drag itself up by the boot straps. A 4 per cent rise in mortgage lending to £12.1bn in April saw it hit its highest level in four years, although this is still barely half the levels seen in the first half of the last decade. Government initiatives such as help to buy and new buy are fuelling renewed interest in the housing market and also giving shares in housebuilders a further lift in what would normally be a period of consolidation after their traditional first-quarter outperformance.
Bank assurance
No new shares
The two part state-owned UK banks, Lloyds Banking Group and Royal Bank of Scotland, have both moved this week to confirm their capital positions following a review of the capital positions by the newly formed Prudential Regulation Authority. Both banks were at pains to point out that there would be no need for them to issue any fresh shares to shore up their capital positions and both would continue down the route of selling off non-core assets to support their capital ratios with RBS confirming plans for a partial public offering of its US bank Citizens. Meanwhile, leading building society Nationwide this week doubled its provisions against commercial property loans to £500m.
