Must read: FTSE 100, US jobs report, UK house prices, Metro Bank

GLOBAL MARKETS

After the FTSE 100 snapped a three-session losing streak on Thursday, the UK blue-chip index has opened higher again. Financial stocks like Aviva (LSE:AV.), Legal & General Group (LSE:LGEN), and Prudential (LSE:PRU) are leading the gains, while consumer staples like Unilever (LSE:ULVR) and Reckitt Benckiser Group (LSE:RKT) are underperforming. 

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All eyes are on the US jobs report at lunchtime, with nonfarm payrolls expected to rise by 170,00 in September, a significant slowdown from 187,000 in July. Oil is trading higher this morning but remains on track for its biggest weekly drop since March.

UK HALIFAX HOUSE PRICE INDEX 

UK Halifax house prices fell by 4.7% in September year-on-year, the fastest drop since 2009. The mortgage lender also saw house prices fall by 0.4% versus the previous month, the sixth consecutive monthly decline but an improvement from a drop of 1.8% in August. Looking ahead the mortgage lender warned that downward pressure on house prices is likely to continue into next year. 

A typical UK home now costs £278,601 and prices remain higher by £39,000 versus pre-Covid levels and 1% higher than December 2021 when the Bank of England began its tightening cycle. The fastest stream of rate rises from the central bank in recent history has made mortgages significantly less affordable, dampening demand for house purchases and in turn prices. Sellers are less incentivised to list their properties too with prices on the decline.  

With interest rates set to remain higher for longer, there’s likely to be ongoing pressure on house prices ahead. However, with the Bank of England keeping rates on hold at its most recent decision, strong wage growth and recent cuts to fixed rate mortgage deals, conditions have been improving slightly this month. And a shortage of housing supply in the UK is likely to stem an even steeper downturn in property prices.

METRO BANK 

Metro Bank Holdings (LSE:MTRO) is attempting to claw back some of yesterday’s sharp slide. The stock is trading higher, but today’s rebound pales into insignificance compared with yesterday’s near 30% plunge following news of its urgent capital raising plans. Treasury officials and the Bank of England were reportedly in talks last night over Metro and are understood to be monitoring the situation closely. Meanwhile, the challenger bank is reportedly in talks to sell some of its mortgage book worth around £3 billion to prop up its balance sheet, helping to boost shares today. 

Yesterday’s sell-off followed news that Metro Bank is looking to raise hundreds of millions of pounds in cash to boost its balance sheet. Fitch also put the stock on negative watch. But it has long been facing financial difficulties resulting in a dismal share price performance, down over 98% in five years. Following its IPO in 2016 at £20 a share, the stock initially enjoyed a major vote of confidence among investors rallying to around £40 by 2018. However, since then it has been largely downhill for the shares which are now trading at around just 40 pence, reflecting the lack of confidence and its balance sheet woes. 

After the US mid-sized banking crisis as well as the forced rescue deal for Credit Suisse earlier in the year, Metro is yet another worry in the sector. However, it is a problem unique to the bank itself rather than a sector wide issue. But it highlights just how difficult it is for a challenger bank to compete with the longstanding dominant heavyweight lenders.