How Windy Is It . . . ? Monday, 17th July 2017 – No.238

The week began after a somewhat tense G20 summit in Hamburg where 19 of the world’s leaders reaffirmed their commitment to the Paris climate agreement (an international effort to slow global warming); the lone abstainer being Donald Trump.  After prolonged discussions, the final communique was accompanied by an agreed climate and energy plan that sets goals to phase out fossil fuel subsidies and shift countries towards “affordable, reliable, sustainable and low greenhouse gas emission energy systems as soon as feasible”. A lengthy notice period means that the US withdrawal from the Paris agreement will not take place until November 2020, however, recent developments suggest that Mr Trump has opened the door to a reversal of his decision. The US would become one of only three countries in the world not signed up to the landmark 2015 deal; the others being Nicaragua, and Syria.

It was reported by the Royal Institution of Chartered Surveyors (RICS) that the UK housing market is in a state of lethargy, with estate agents declaring their lowest level of stock for nearly 40 years. The average number of homes on agents’ books fell to 42.5, the lowest number since the survey started in January 1978. New instructions in June fell for the 16th month in a row. Additionally, Halifax announced that house prices fell 1% in June, resulting in annual growth of 2.6%, the lowest for 4 years. Rising inflation and taxes on buy-to-lets and second properties have weakened recent demand. London properties continue to fall whereas valuations appear to be rising in the North West, Northern Ireland and the West Midlands.

The weaker pound has resulted in a record number of tourists coming to the UK. According to the Office of National Statistics (ONS) there was a 21% rise in visitors during the first 3 months of 2017, spending a record £4.4bn. However, UK residents were not deterred from a weak sterling, making 14 million trips abroad, a rise of 8%. The ONS also reported that over the 3 months to May, the UK jobless rate fell 64,000 to 1.5m, representing 4.5% of the workforce; a 42-year low.

In the markets, the main UK indices showed little aggregated movement over the week. Both the FTSE 100 and FTSE 250 indices fell on Tuesday following a choppy US trading session leading up to Federal Reserve Chair, Janet Yellen, providing her semi-annual testimony to Congress. Mrs Yellen stated that the US labour market continues to recover, with the economy growing at a moderate pace, and therefore interest rates “won’t have to rise all that much further.” Similarly, ratings agency, Standard & Poors, said it expects UK economic growth to slow to 1.4% this year and only 0.9% for 2018, and thought the Bank of England will not raise interest rates until mid-2019.

The UK indices rebounded on Wednesday and Thursday, over the next couple of days, due to a rise in mining and oil stocks, with the FTSE 100 Index posting its biggest daily gain since April. Of particular note during the week was the fall in value of Carillion shares as a result of the company issuing a profits warning due to increased levels of debt. The departure of the CEO and the suspension of the dividend exacerbated the misery for shareholders.  The share price fell over 70% during the week; a loss in market capitalisation of over £550m.