Must read: FTSE 100, BAE Systems, UK house prices

GLOBAL MARKETS 

After the FTSE 100 suffered its biggest weekly drop in five months, the UK index has opened higher. BAE Systems (LSE:BA.) is at the top of charts after Norway selects the UK as its strategic partner for new frigates. 

Fresnillo (LSE:FRES) is also near the top of the basket thanks to gains for precious metals, with silver at a 14-year high. UK banks were hit hard last week following a report from the Institute of Public Policy Research suggesting that the Chancellor should impose a new tax on the banking sector to help plug the fiscal black hole in her upcoming autumn budget. 

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In France, businesses are warning of recession risk as political uncertainty, fiscal instability and US tariffs weigh on consumer and business confidence.

Overnight, the Nikkei fell to a three-week low with declines in the chip sector, following Wall Street into the red. Alibaba Group Holding Ltd ADR (NYSE:BABA) shares soared in Hong Kong following a Wall Street Journal report it is developing a rival chip to NVIDIA Corp (NASDAQ:NVDA). BYD Co Ltd Class H (SEHK:1211) shares have dropped after reporting a 30% decline in quarterly profits. 

In terms of data, the S&P Global Japan Manufacturing PMI hit 49.7 in August, up from July but still below the key 50-boom-bust divide. PMIs in South Korea and Taiwan were also weak. For China it was a mixed picture with the RatingDog China General Manufacturing PMI hitting 50.5 in August, beating expectations. However, the official manufacturing reading saw activity shrink for the fifth straight month. 

US markets are closed for Labor Day today after the S&P 500 closed August in the green for the fourth consecutive month, despite ending Friday lower as the Nasdaq slid over 1% on the back of a tech-driven sell-off. The US dollar index has hit the lowest level since 28 July while gold continues to climb, inching closer towards an all-time high, driven by expectations of a US interest rate cut this month and tariff uncertainty. Focus this week is on the Fed Beige Book, the US jobs report, the JOLTs survey and the ADP report.

UK NATIONWIDE HOUSE PRICES  

British house prices fell by 0.1% in August, the third month-on-month decline since April and below expectations for a gain of 0.2%. Annually, prices increased by 2.1%, also below forecasts for a gain of 2.8%. 

High house prices compared to salaries continue to create affordability challenges for many aspiring homeowners, particularly amid the backdrop of sluggish economic growth and growing slack in the labour market. Plus, the potential for tax increases at the upcoming Autumn Budget is casting a shadow over the housing market, with fiscal uncertainty weighing on activity in the property market. While the Bank of England did provide some support to the market by cutting interest rates at its more recent decision meeting, there are concerns about inflationary pressures that could limit the scope for future rate cuts.