The noise
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UK house prices fell by 5.3% in August compared to the year before according to Nationwide, their biggest annual fall since 2009. Higher borrowing costs for buyers has slowed activity in the housing market, and mortgage approvals in July dropped to its lowest level since February as a result. Across all property types, the biggest decline in purchases has been in detached houses, as buyers look to smaller and more affordable properties. Perhaps unsurprisingly, cash purchases are up 2% as those with the means are looking to buy the dip.
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The second quarter growth rate of US GDP was revised downward, which is a positive development for the Federal Reserve, who are looking to cool demand to curb rising prices. GDP grew at an annualised rate of 2.1% in Q2, 0.3% lower than the 2.4% the US Commerce Department initially estimated. The second estimate factored in greater consumer spending, government outlays and exports, but saw business investment and inventories revised lower.
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The World Bank has approved $650 million in financing for two projects in Argentina. The first project focuses on increasing access to finance for micro, small and medium enterprises to enable them to more effectively address and adapt to climate-related risks, the second is to bolster food programs. The former will prioritise financing for companies led by women and vulnerable groups, supporting them as they face climate risks and improve their ability to compete in green markets.
The numbers
GBP Performance to 31/08/2023
|
Equity GBP Total Return
|
1 Week
|
YTD
|
|
MSCI ACWI
|
2.2%
|
10.0%
|
|
MSCI USA
|
2.9%
|
13.4%
|
|
MSCI Europe
|
1.2%
|
7.4%
|
|
MSCI UK
|
1.3%
|
2.9%
|
|
MSCI Japan
|
1.6%
|
8.5%
|
|
MSCI Asia Pacific ex Japan
|
0.4%
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-2.2%
|
|
MSCI Emerging Markets
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-0.5%
|
-0.1%
|
|
MSCI EAFE
|
1.5%
|
6.3%
|
|
Fixed income GBP Total Return
|
|
|
UK Gilts
|
0.6%
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-3.6%
|
|
Global Aggregate
|
0.6%
|
2.3%
|
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Global Treasury
|
0.5%
|
2.3%
|
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Global Investment Grade Hedged
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0.8%
|
2.7%
|
|
Global High Yield hedged
|
0.7%
|
6.0%
|
|
Currency moves
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|
|
|
GBP vs USD
|
0.6%
|
4.9%
|
|
GBP vs EUR
|
0.3%
|
3.5%
|
|
GBP vs JPY
|
0.4%
|
16.4%
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|
Commodities GBP return
|
|
|
Gold
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0.6%
|
1.5%
|
|
Oil
|
5.5%
|
2.0%
|
Source: Bloomberg, data as at 31/08/2023
The nuance
As second quarter US GDP growth was revised downwards, US consumer spending increased by the most in six months in July, up 0.8% as Americans bought more goods and services. Many market observers including JP Morgan are expecting softer readings for consumer spending going forward, as households draw down on excess savings accumulated during the Covid-19 pandemic. July’s solid increase has put real consumer spending on a higher growth path than expected, which has prompted economists to raise their GDP estimates. JP Morgan boosted their estimate for the third quarter of 2023 to 3.5% annualised from 2.5%, as they see more opportunities for GDP growth in Q3 versus Q2.
The latest reading on consumer spending and the downward revision on Q2 GDP growth has seen US equity markets rise so far this week, as US Treasury yields have fallen.
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