May 2, 2017

Pegler’s market report – 02.05.17: House prices higher but increases declining

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (02.05.17) Business on page 21 under the title Pegler’s Market Report:

House prices higher but increases declining

British house prices fell for a second month in a row in April, suggesting households are feeling the pinch from rising inflation since last year’s Brexit vote and low wage growth, data from mortgage lender Nationwide showed recently. Nationwide said house prices declined by a monthly 0.4pc following a fall of 0.3pc in March, which had been the first fall since mid-2015. In annual terms, prices were 2.6pc higher, the weakest increase in almost four years. The average cost of a UK home is now £208,000.

Taylor Wimpey has apologised to customers and set aside £130m to resolve disputes over homes that were sold on leases that stipulated their ground rents would double every 10 years. Elsewhere in the sector, Persimmon released an upbeat trading update, which cited strong demand from first time buyers and good mortgage availability as reasons for robust sales growth.

ECB chief Mario Draghi made reference to the threat of protectionism, which he felt was likely to diminish, sounding a cautiously optimistic tone amid global fears that Donald Trump’s America First policy could spark trade wars. With a nationalist economic agenda, the Trump administration has vowed to upend decades of prevailing trade policy by renegotiating or scrapping trade agreements, imposing hefty tariffs and moving to bilateral trade agreements.

The European Central Bank left its ultra-easy policy stance firmly in place last week as inflation continued to undershoot its target into the fifth straight year, even as economic growth is on its best run since the global financial crisis. The ECB even maintained its bias for further policy easing, leaving the door open to further rates cuts.

Profits at Lloyds Bank more than doubled in the first quarter of the year, as the Government prepares to sell the last of its stake in the high-street lender. For the three months to March 31, pre-tax profits hit £1.3bn, from £654m a year earlier. The improvement came despite the bank having to set aside an extra £350m for payment protection insurance (PPI) miss-selling. In March the Financial Conduct Authority confirmed that consumers will have a cut-off date of August 2019 to make a claim for PPI. Lloyds’s total bill for PPI is now almost £17.4bn.

Alton Towers and Legoland operator Merlin Entertainments powered to new highs after Morgan Stanley predicted the company’s stock price could double by 2022. In a bullish note, the US investment bank lifted the stock’s price target as it believes Merlin’s themed hotel opportunity is “significantly underappreciated” and could bolster earnings by 30pc over the next five years. Merlin has already opened around 3,600 rooms and is ahead of its target to open 2,000 rooms by 2020. Merlin is also owner of Sea Life, Brighton.

By David Pegler, Brighton Capital Management