Interactive Investor

Must read: UK consumer confidence, US rates, Japan at 33-year high, Nationwide

19th May 2023 08:59

by Victoria Scholar from interactive investor

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Our head of investment rounds up the morning's big news.

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    GLOBAL MARKETS 

    Positive momentum is accelerating, with another day of gains for the FTSE 100 amid growing hopes of a debt ceiling deal in the United States.

    Smiths Group (LSE:SMIN) is trading towards the top of the UK index after raising its guidance, while Burberry Group (LSE:BRBY) is extending losses following Thursday’s earnings driven decline. GfK UK consumer confidence in May rose to -27, the fourth consecutive monthly increase, rebounding from January’s trough of -45.

    The US dollar index is trading around two-month highs as monetary policymakers stateside consider a ‘Fed skip’, whereby the Federal Reserve keeps rates on hold in June but leaves the door open for another hike at its subsequent rate setting meeting.

    While gold is trading higher today, it is on track for its biggest weekly drop since February, weighed down by the greenback’s rebound. 

    The Nikkei 225 rose overnight, closing above 30,800 and reaching the highest level in almost 33 years, thanks to the yen’s weakness and impressive Japanese earnings. But Japan’s inflation rose to 3.5% in April, picking up after March’s six-month low.

    NATIONWIDE  

    Nationwide reported a near-40% increase in full-year pre-tax profit to £2.2 billion. It is also paying customers £340 million through a £100 payment to eligible customers through their current accounts next month thanks to its building society status. Nationwide set aside £126 million for potential bad loans, increasing by almost £100 million year-on-year.

    The building society has benefitted from the rising rate environment, allowing it to earn more on lending products such as mortgages, which have become significantly more expensive as the Bank of England desperately tries to tame inflation.

    However, the macroeconomic headwinds of sluggish growth and rampant inflation raises the risk of loans turning sour, forcing Nationwide to up its provisions in preparation.

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