Must read: FTSE 100, NatWest, UK house prices, Direct Line

GLOBAL MARKETS

European markets have opened lower with the FTSE 100 under pressure - miners like Anglo American (LSE:AAL), Rio Tinto Registered Shares (LSE:RIO) and Glencore (LSE:GLEN) are trading near the bottom of the basket following further weak trade data overnight from China.

There’s negative momentum across equities globally, with Asian markets in the red overnight and the tech-heavy Nasdaq stateside closing down for the third straight session.

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The pound is under pressure against the US dollar, driven by stronger ISM services sector data stateside, which lifted the greenback as well as comments from the Bank of England governor Andrew Bailey suggesting the peak of the rate hiking cycle is near. 

NATWEST 

NatWest Group (LSE:NWG) has confirmed it is appointing Rick Haythornthwaite as the bank’s next chair, joining the board on 8 January and taking on the role on 16 April. He’s replacing Sir Howard Davies whose planned retirement was accelerated in the wake of the Nigel Farage de-banking scandal. 

As a longstanding City heavyweight, Haythornthwaite is no stranger to chairing big British business, currently holding the role at Ocado, which he will keep and at AA where he will be stepping down. He also previously held chairman roles at companies including Centrica and Network Rail. Plus, he has longstanding experience in the financial services sector, having been the chairman of Mastercard for 14 years. 

Working with interim CEO Paul Thwaite, the job at hand is a daunting one, firstly helping NatWest to recover its reputational damage from the recent de-banking scandal. Haythornthwaite will need to help find a permanent CEO to replace Dame Alison Rose who was forced to leave over her discussions with a BBC journalist about Farage and his banking arrangements at NatWest’s high-end private bank, Coutts.  

The government’s stake in the business also remains a major overhang - a legacy from the 2008 financial crisis era when the bank, formerly RBS, was bailed out by the taxpayer. And revitalising its share price is another key task at hand for those at the top of the business – shares were heavily punished by the recent scandal and the stock is down over 20% in the past six months.

At least its finances are in order – NatWest’s latest results for the half-year saw rock solid fundamentals with total income up 25% over the half thanks to rising interest rates which have supported mortgage lending and retail banking more broadly. 

Despite the recent uncertainty, most analysts maintain a buy recommendation on the stock with 15 buys versus 4 holds and 2 sell recommendations.

UK HALIFAX HOUSE PRICES 

Halifax house prices fell by 4.6% in August, below analysts’ expectations for a drop of 3.45% year-on-year. On a monthly basis house prices decreased by 1.9%, also weaker than forecasts for a decline of 0.3%. The average property price stands at early 2022 levels, £279,569, down £14,000 versus last year’s peak. 

UK house prices fell the most since 2009 in August, dropping for a fifth consecutive month as 14 consecutive rate rises from the Bank of England weigh on mortgage affordability. This has prompted sellers to negatively recalibrate their asking prices as property demand softens. Halifax anticipates that this trend will continue with further weakness coming through later this year into next. While falling house prices can help first-time buyers get onto the housing market, many individuals and families are facing a perfect storm, stuck with the dilemma of deciding between extortionate rental costs or hefty monthly mortgage repayments. 

Despite this, both Nationwide and Halifax have taken a relatively optimistic stance on the market’s decline. Nationwide anticipates a ‘soft landing’ rather than a housing crash and Halifax said that house prices ‘have proven more resilient than expected so far this year.’ 

DIRECT LINE 

Direct Line Insurance Group (LSE:DLG) reported a first half operating loss of £78.3 million, down from a profit of £197 million this time last year due to lower earnings in motor insurance. This year, profit is expected to continue to come under pressure. However, looking further ahead, Direct Line optimistically expects an improvement in operating profit int 2024 driven by rising premium prices, helping to lift margins in its motor insurance business. 

Direct Line has been negatively impacted by higher motor insurance claims as well as the elevated cost inflation backdrop which have squeezed profit margins. To help offset this, it has been increasing pricing with gross written premium growth of 7% in motor insurance. 

Investors have shrugged off its first-half loss, focusing instead on its rosy outlook for next year, which has helped to propel shares sharply higher today. It outlined four key areas – improving pricing, boosting its underwriting footprint, the launch of its cheaper essential motor product and a strengthening team, which Direct Line believes will help drive the business in a more positive direction in 2024. 

Shares are still lower by around 25% so far this year, although today’s double-digit percentage surge has helped to partially offset some of its year-to-date decline.