July 19, 2016

Pegler’s market report – 19.07.16: UK rates kept on hold

As published in the Brighton Argus (19.07.16) Business on page 21 under the title Pegler’s Market Report:

UK rates kept on hold

The Bank of England opted to keep interest rates on hold at 0.5pc despite the Bank’s Governor, who only a fortnight ago said he believed monetary easing would be required “over the summer”. Markets, which backed the wrong horse in the referendum, were generally mistaken again.

Officials did however signal that more stimulus was on the way, but wanted to wait and see before pulling the trigger on a fresh round of easing. Eight out of the nine policymakers on the Monetary Policy Committee (MPC) – including Carney – voted to keep rates on hold. A number of economists now think there is good chance the Bank will take action in August, when policymakers have the benefit of more detailed analysis on the likely impact of Brexit on growth, prices and jobs.

The number of people wanting to buy a house has fallen to the lowest level since mid-2008 amid post-referendum uncertainty, according to the Royal Institution of Chartered Surveyors. In its residential market survey, which has been carried out since the referendum, 27pc more surveyors polled said that house prices would fall rather than rise across the country in the next three months. That dip in prices is expected to remain in London and the east of England for the next 12 months. This fall is not expected to be in the long term, however: those polled said that prices are still expected to rise over the next five years across the country, by an average of 14pc.

The travel stocks, which have already been beaten up because of concerns about the weakness of sterling, took yet another hit after news of the Nice terror attack. Earlier last week there were some positive industry vibes from Delta Airlines after a decent trading update but any gains since then have unfortunately been lost.

Elsewhere, SuperGroup, the company behind the Superdry fashion brand, surged to the top of the mid-cap index after it announced that it would pay investors a 20p special dividend, in addition to a final dividend of 17p a share. Its full-year results also revealed sales had risen 20pc to £590m and pre-tax profits had surged 16pc to £73.5m.

By David Pegler, Brighton Capital Management