End of term
The end of the month, the quarter and the half-year combined to produce a quite meaningless day on Monday. There were once again no startling statistics or news to motivate investors so they did whatever their customers asked them to do, based on the calendar rather than on economic developments.
Sterling struggled for a second day, avoiding the bottom slot only because the Japanese yen did a tiny bit worse. Among the major currencies the pound is in last place for the quarter and the half-year, down by averages of 4.6% and 5% respectively. The top performers in 2020 to date are the Swiss franc, up by an average of 3.7%, and the yen, which is 2.8% stronger.
There was little reaction to a speech that the Prime Minister has not yet made, but which was comprehensively leaked on Monday. He intends to spend £5 billion on the repair of roads, hospitals, schools, parks, prisons and other public infrastructure. That lack of reaction was principally because the spending does not involve new money, it is a repackaging of manifesto commitments.
Data from Britain and the United States told quite different stories about the residential property market. While mortgage borrowing in the UK continued to evaporate, buying and building turned upwards in North America.
Data from the Bank of England showed monthly mortgage approvals falling to 9,273 in May, the fewest since they started counting in 1997. By way of comparison, 65,191 mortgages were approved in May last year and 64,873 in May 2018. At the same time, people continued to reduce other borrowings, with a net repayment of £4.6 billion.
Across the pond, Canadian building permits rose 20.2% in May and US pending home sales rebounded by a record 44.3% after falling 21.8% in April and 20.8% in March. It is fair to point out that the North American numbers are not directly comparable to those from the UK because they are forward-looking. Mortgage approvals can only happen after the would-be buyer and the lender’s surveyor have been to look at the property, and the lockdown has prevented those from taking place.
Growth in China
There was little to glean from Monday’s other economic data. Provisional Spanish inflation rose to -0.3% and in Germany it accelerated from 0.6% to 0.9%. China’s CFLP purchasing managers’ indices showed manufacturing growing more rapidly at 50.9 while services picked up from 53.6 to 54.4. Both were stronger than expected.
A cornucopia of ecostats is piled into today’s agenda. Already out of the way are the numbers from Japan which put unemployment in May at 2.9% and industrial production down by a provisional 25.9% on the year. Revised figures for UK gross domestic product showed the economy shrinking by 2.2% in the first quarter, a little more than previously estimated. The equivalent reading for Spain was -5.2%.
Coming up this morning are inflation readings from Italy and Euroland, and first quarter GDP from South Africa, predicted to be -3.7%. After lunch come US house prices and consumer confidence and the Chicago purchasing managers’ index. US Federal Reserve Chairman Jay Powell and treasury secretary Steve Mnuchin will make an appearance, as will Fed Governor Lael Brainard and ECB vice president Luis de Guindos.