Must read: FTSE 100, oil, Tesla, UK house prices

GLOBAL MARKETS

European markets have kicked off the first session of the second quarter on a positive note with the FTSE 100 leading the charge, driven by commodity stocks such as Fresnillo (LSE:FRES), Glencore (LSE:GLEN), Shell (LSE:SHEL) and BP (LSE:BP.). Meanwhile, GSK (LSE:GSK) and Reckitt Benckiser Group (LSE:RKT) are stuck at the bottom of the index. 

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Oil prices continue to stage gains with WTI and Brent crude in the green after closing at five-month highs on Monday thanks to tightening supplies as well as strong US demand. 

In the US, focus is on Tesla Inc (NASDAQ:TSLA)’s quarterly deliveries - Wall Street is expecting a disappointing quarter on the back of weak demand for electric vehicles and higher interest rates. Bloomberg’s consensus is for 449,080 vehicle deliveries, down 7% from the fourth quarter. Shares in Tesla have already fallen by nearly 30% so far this year.

UK SHOP PRICE INFLATION 

According to the British Retail Consortium, shop price inflation in the UK fell sharply to 1.3% in March from 2.5% in February, hitting the lowest level since December 2021. Non-food price inflation hit just 0.2% and food price inflation touched 3.7%, both falling month-on-month from 1.3% and 5% respectively. 

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Intense price competition amid the major supermarkets particularly from the German discounters Aldi and Lidl, combined with a raft of Easter discounts and falling dairy prices helped to provide some respite for shop inflation last month. 

Retailers, however, are dealing with pressures from the sluggish economic growth backdrop, highly price sensitive consumers, and elevated costs from strong wage growth and Brexit border checks. For the Bank of England, however, these figures are encouraging, pointing to a continued decline for price pressures from the post-pandemic highs in 2022 and are likely to support the case for the central bank’s first rate cut this summer, either in June or August.

UK NATIONWIDE HOUSE PRICES 

According to Nationwide, house prices rose by 1.6% in March year-on-year, the fastest increase since December 2022. However, this was below analysts’ expectations, and the month-on-month figure saw property prices decline by 0.2% swinging from a gain of 0.7% in February and defying forecasts for another monthly increase. Nationwide said the market remains “relatively subdued by historic standards”.

Expectations for Bank of England rate cuts combined with competition among mortgage brokers and weak demand resulted in lending rate reductions at the start of the year. This provided some support to house prices after the pain inflicted on the market over the last two years on the back of the central bank’s aggressive stream of rate hikes. However, mortgage rates started to pick up again in February and March as it became clear that the central bank was in no rush to start cutting interest rates, which are still stuck at more than 15-year highs. This has pushed individuals and families away from the sales market towards the lettings market instead where rental costs have been rising at a record pace. 

Once the Bank of England begins cutting interest rates, and borrowing becomes more affordable, there could be a pick-up in housing market activity once again, possibly in the latter half of 2024 or in 2025.