European markets have opened higher with the FTSE 100 lifted by Phoenix Group Holdings (LSE:PHNX) which has surged after raising its full-year cash generation target. British Land Co (LSE:BLND) is also trading near the top of the UK blue chip index thanks to its optimistic rental growth outlook.
In UK politics, Suella Braverman has reportedly been sacked as home secretary amid an expected cabinet reshuffle today.
Over the weekend Novo Nordisk A/S ADR (XETRA:NOVA) said new trial data showed that its weight-loss drug Wegovy cuts the risk of death by 18%, sending shares sharply higher today, extending the recent surge. US futures are pointing to a lower open. Credit ratings agency Moody’s has lowered its outlook on US credit to ‘negative’.
Focus this week turns to inflation figures in the US and the UK as well as a meeting between US President Biden and China’s Xi Jinping. Plus, there is a slew of data set to be released from China which will give clues into the strength of the world’s second largest economy.
RIGHTMOVE HOUSE PRICES
According to Rightmove, average asking prices in Britain fell by 1.7%, or £6,088 in November month-on-month, the fastest drop in five years for this time of year. That’s down from an increase of 0.5% in the previous month. Year-on-year house prices fell by 1.3%, accelerating from a decline of 0.8% in October.
Newly listed asking prices have fallen by 3% since the May peak and agreed sales are down 10% versus before the pandemic. The time it takes to sell a property has lengthened significantly from 40 days a year ago on average to 62 days.
The housing market typically slows at this time of year as the wind down to Christmas begins and as the seasonal back-to-school September rush fades. However, Rightmove said the drop this month was bigger than usual. The Bank of England’s aggressive stream of 14 consecutive rate hikes, which continue to make their way through the economy, are sharply weighing on mortgage affordability and appetite in the market for buying and selling activity.
With prices coming down and expectations for further weakness in the housing market next year, this is very much a buyers’ market, particularly for individuals and families who don’t need to load up on debt. But many of those who need a mortgage have been spooked by the surge in borrowing rates, holding off until next year, hoping that borrowing rates will ease and mortgage affordability improves. Plus, sellers are less incentivised to list their properties at the moment given that they would most likely need to drop their asking prices.
On a more positive note, Rightmove said that the housing shortage is easing. And with the Bank of England keeping rates on hold at its two most recent decision meetings, there are expectations that with inflation coming down, the mortgage market could be shifting beyond its peak. In an optimistic sign, just last week Nationwide dropped its two-year fixed mortgage rate below 5% in what it called a ‘watershed moment’ for the housing market.
Seven million passengers flew through Heathrow airport in October with 2.2 million passing through its terminals over half-term, with Dubai, New York and Los Angeles among the popular destinations. Last month, Heathrow reported a quarterly loss which narrowed to £19 million and said it expects 2024 traffic to meet pre-Covid levels from 2019.
It was a blockbuster summer for air travel, laid bare by the impressive results from the airlines like International Consolidated Airlines Group SA (LSE:IAG), easyJet (LSE:EZJ) and Ryanair. Heathrow has still enjoyed further strength in passenger traffic figures in October, with expectations for a boost over the busy Christmas school holidays. Heathrow is launching a range of retail offerings to support the holiday peaks.
While recreational travel has proven to be remarkably resilient amid the cost-of-living crisis, the risk of recession in the UK could weigh on passenger traffic next year. And business travel remains lower than pre-Covid levels as video conferencing meetings continue to be the new norm.
British Land reported underlying six-month profit up 3.4% to £142 million. Estimated rental value (ERV) growth is expected to come in at the top end of its previously guided range in the full-year 2024. It also reported a half-year dividend per share of 12.16p up 4.8%. And occupancy at its campuses came in strong at 96%. However, like many businesses, it warned that the geopolitical and economic landscape remains uncertain.
The stock has come under pressure this year, down around 20% since the beginning of January, caught up in the macro pressures of rising interest rates which have hurt landlords and a reduction in demand for commercial offices with the shift towards working from home. But shares in British Land are trading higher, boosted by its optimistic forecast for full-year ERV growth. With the UK approaching the peak for base rates, British Land is optimistic that its strong occupational fundamentals and the quality of its assets will support performance going ahead, potentially marking a turning point for the sector.
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