China consumer sentiment increases to highest in more than a year
As Chinese demand for commodities wanes and markets fret over a slowdown in the world’s second-largest economy, last we received a ray of hope from the 1.3 billion Chinese consumers.
The Westpack MNI China Consumer Sentiment increased to 118.2 in September, the highest since 2014 and a leading indicator of mainland Chinese consumer strength.
The survey of 1000 Chinese consumers showed that general consumers ‘views of the economy were improving due to increased stability in the housing market and the fact that only around 11% of households are invested in the stock market.
As China slows, fears are increasing that there will be a fast reduction in GDP growth, known as a ‘hard-landing’. Last night’s data will go some way to quell these fears and lends support to the view that China is going through an inevitable transition to an economy that is increasingly reliant on domestic demand.
According to the World Bank, Chinese household consumption was only 36% of GDP which compares to 64.4% in the UK and 68.5% in the US.
China’s largest component of GDP is currently net exports. As exports slow the potential for personal consumption to grow as a percentage of GDP is key to China’s future economic growth.
House price growth rises in August, but consumer confidence falls
British house price growth rose 0.5 percent in September, more than expected by analysts, according to data released by mortgage lender Nationwide on Wednesday.
This data is the latest in a string of indications recently that the housing market may be getting back on track, after a dip at the end of last year.
House prices were up on August’s figure of 0.4 percent and rose on an annual basis by 3.8 percent, up from 3.2 percent last month. This is complementary to data released yesterday, showing mortgage lending increased the most since 2008 and confidence in the market is on the rise.
The Chief Economist at Nationwide, Robert Gardner, commented: “The data in recent months provides some encouragement that the pace of house price increases may be stabilising close to the pace of earnings growth.”
However, news across the spectrum may not be so positive. A further survey showed on Wednesday that GfK’s consumer confidence index fell strongly in August, dropping from +7 to +3; signs that consumer confidence has been hit by both the economic downturn in China and the migrant crisis in Europe.
Asian shares fall, dragged by Glencore
Asian shares fell sharply on Tuesday as falling commodity prices continue to affect global markets.
The Shanghai Composite closed down 2% at 3,038.14 and in Tokyo, the Nikkei 225 index closed down 4.05% at 16,930.84. Japanese shares have suffered a difficult period over the last few weeks, with the economy struggling to pick up again after a disappoint second quarter. The index dropped to an eight-month low, as investors await the Bank of Japan’s Tankan business confidence survey due to be released on Thursday. Markets are uncertain throughout Asia as investors await the manufacturing surveys on Thursday for more information on the extent of the slowdown in China. Elsewhere in Asia, Hong Kong’s Hang Seng index also closed down 3% at 20,556.60 on its first day back after the national holiday. A 30 percent drop in Glencore shares (LON:GLEN) pulled the benchmark index down. Shares in mining giant Glencore have fallen 87 percent since it listed in 2011 as commodity prices continue to fall, with more than 7 billion pounds in market value wiped out over the last week. Yesterday was a difficult day all round for the mining sector, with uncertainty in the sector also pushing Australian-listed shares of BHP Billiton (ASX:BHP) down 6.4%, and Rio Tinto (ASX:RIO) 4.6%.India lowers interest rates as commodity prices continue to hit
India’s central bank has lowered interest rates to their lowest level in four and a half years, in an attempt to bolster an economy increasingly affected by the slowdown in Asia and falling commodity prices.
The Reserve Bank of India (RBI) reduced its repo rate, the rate at which it lends to commercial banks, to 6.75 percent from 7.25 percent. Economists had forecast a reduction to 7 percent.
The governor of the RBI, Raghuram Rajan, has been under increasing pressure from Prime Minister Narendra Modi’s government to reduce borrowing costs, after India’s inflation hit a record low of 3.6% in August.
In a statement, Rajan said that “a tentative economic recovery is underway, but it is still far from robust”, and cited the need to counterbalance the effect of continuing low commodity prices.
“Investment is likely to respond more strongly (and boost domestic demand) if there is more certainty about the extent of monetary stimulus in the pipeline.”
Rajan, the former chief economist of the International Monetary Fund, is aiming to keep inflation within 6 percent by January, 5 percent a year later and near 4 percent by early 2018.
Whilst there are fears that India’s economy is slowing, it currently still has one of the highest growth rates in the world with a growth forecast of 6.4 percent for 2015; almost double the UK’s rate of 3 percent.
Mortgage lending jumps in August, indicating further growth
U.K. mortgage lending jumped by nearly 3000 in August, the most since before the financial crisis, according to new data released by the Bank of England on Tuesday.
With a rate hike looming, customers hoping to take advantage of current interest rates have fuelled demand and mortgage approvals for house purchases totalled 71,030 in August, beating expectations and up on July’s figure of 69,010. Net lending on property rose by £3.4 billion.
This is the latest in a string of economic data suggesting that Britain’s housing market is hotting up. According to Rightmove, asking prices for U.K. homes hit national records in September; and although the market suffered a temporary dip last year when new government rules on mortgage lending came into force, it appears to have got back on track with mortgage approvals rising consistently for most of this year.
Corbynomics: Labour’s promises to crack down on corporate tax avoidance
Since Jeremy Corbyn was elected the leader of the British Labour Party, boasting almost 59.5% of first preference votes, every move by the Labour party has been heavily scrutinized from all sides. This includes the new economic policies that Corbyn now hopes to push for, or as they have been named; Corbynomics.
Corbyn’s approach to the economy has led to opponents heralding the Labour party as ‘unelectable’ but John McDonnell, the Labour Party’s newly appointed Shadow Chancellor, hopes to win support through his promise to find £20bn-£25bn of uncollected taxes and narrow the total £120bn tax gap between the taxes due and those that are collected. This will in turn replace policies such as the 1% pay freeze on public sector workers in the hopes to cut the deficit without austerity.
McDonnell specifically singled out corporations including Amazon, who last year only paid £4.2m in tax last year despite selling £4.3bn worth of goods due to loopholes McDonnell hopes to close down.
So will Corbyn’s new left-wing economic policies including the crack down on tax avoidance lift the burden from middle and low income earners as McDonnell promises, or are they as David Cameron claims; a threat to Britain’s economic security?
Safiya Bashir on 28/09/2015
Apple breaks records, selling 13 million of iPhone 6s & 6s Plus over launch weekend
With the design of Apple’s new iPhone 6s and 6s Plus models released only two weeks ago, Apple has exceeded high expectations; figures released earlier today revealed that the new iPhone has hit record sales over its first weekend on the market.
Tim Cooke, Apple’s chief executive, said earlier in a statement that the sales of the iPhone 6s and 6s Plus have been “phenomenal”, with more than 3 million more phones sold this year than the first weekend sales in 2014.
This increase has undoubtedly been supported by the inclusion of the Chinese market, which has recently overtaken Europe as Apple’s second biggest market, where the launch weekend last year was delayed due to regulatory issues.
New features that Apple has found that customers are “loving” include the 3D touch, sensing how deeply the display is touched, along with the new Live Photos.
After such a successful launch weekend for the new iPhone, sales will undoubtedly continue to grow; Apple are hoping to make the new iPhones available in 130 countries by the end of the year.
Safiya Bashir on 28/09/2015
Glencore tumbles 30%
Investec issued a note this morning saying that should commodity prices continue to decline, shares in commodity companies, in particular Glencore (LON:GLEN), would be worthless.
Investors haven’t hung around to see if there is any weight to Investec’s view; the FTSE 350 Mining sector was down 8% by midday with Glencore trading below 70p, down over 30%.
“If major commodity prices remain at current levels, our analysis implies that, in the absence of substantial restructuring, nearly all the equity value of both Glencore and Anglo American could evaporate,” analysts at Investec said in a note to clients.
The prices of commodities are approaching multiyear lows after a brief lull in selling. Many fear that if recent support levels are broken, the downward pressure on mining stocks could increase.
A Piece of London offers a slice of the property market
As the crowdfunding sector continues to grow, as does its inevitable expansion into property. With house prices rising year on year, especially in prime spots such as the City of London, property investment can be difficult to get into for the ordinary investor. However, property crowdfunding offers an opportunity to pool resources with others to buy into the market; a concept that is growing increasingly popular.
A Piece of London is one such property crowdfunding platform. They have just launched their first two projects, allowing investors to invest as little as £1000 in property in prime locations.
The process is simple. Using the online platform, investors choose a property, set up an account and invest the sum of their choice. Operating under FCA guidelines, A Piece of London will then do the hard work, putting the money together with that of other investors and creating a UK limited company that will then buy the property. A Piece of London then manages the property and divides the rent between the investors; in short, the model has the potential to make ‘buy to let’ a whole lot easier.
Unusually, A Piece of London operate a profit share model, meaning that they only make money from an investment if their investors do. According to them, this “completely aligns their interests with their investors”.
The company’s founder is Fintech entrepreneur Shailash Sanghrajka, who has spent the last 18 years atinvestment banks and hedge funds. He says:
“We want to open up the London property market and make it accessible to ordinary investors wanting to make smaller investments.
“Investors should have control over their investment choice, confidence of exactly what they are buying into and have their own sense of property ownership without the need for huge deposits, mortgages or the hassle of investing on their own.”
Projects include the famous development of Battersea Power Station and new property in Tooting Broadway, which is already nearly 50 percent funding. With estate agent Savills predicting that house prices will rise by 25% over the next five years, this could be an interesting opportunity to get a foot on the ladder.
For more information, visit apieceoflondon.co.uk
Miranda Wadham on 28/09/2015
Aldi UK to make the move online
Discount supermarket Aldi has announced plans to launch an online operation in the UK, offering home delivery and third party collection points from 2016.
The chain will initially begin selling crates of wine online, expanding to “special buys” in the spring. The privately-owned supermarket has continually beaten the performance of British supermarkets such as Sainsbury’s and Tesco, and the company believes moving online is the next logical step.
“This will enable us to introduce the Aldi brand and some of our best-selling, best-quality and best-value products to thousands more customers across the UK,” said Aldi Chief Executive Matthew Barnes.
“As the grocery market continues to evolve, our unique model, operational efficiency, private ownership and financial strength mean we’re able to keep investing in our business – from people and presence to products and prices.”
Aldi is now Britain’s seventh largest grocer with a 5.6 percent share according to market researcher Kantar Worldpanel. The company disclosed a 31% rise in sales to £6.9bn in the 12 months to 31 December; however, it noted that increased investments “in prices and people” saw operating profits fall to £260.3m from £271.4m.