Daily Market Report 26/02/2014

 GBP

UK mortgage approvals hit their highest level since September 2007 last month, but lending to businesses continues to decline. New data from the British Bankers Association showed that loans for new house purchases rose 57% annually in January to 49,972, a 76-month high. Credit card spending jumped 12.5% annually in January to £8.4bn underlining how consumer spending has driven the recovery to date.

A worrying statistic is that borrowing by non-financial firms shrank by another £300m. Manufacturing was the only sector where lending actually rose compared to a year ago. Business borrowing is a good indicator of sustainable growth and if they are not prepared to take on debt to grow it does suggest put a dampener on some of the positive figures seen in the UK. 

UK retailers reported that sales jumped at their fastest rate since June 2012.The survey found that 45% reported that sales volumes were up on a year ago, while 8% said they were down. That sent the net balance soaring to +37%, up from +15% in January.

It suggests retail sales picked up in early February after poor weather kept shoppers off the streets a month ago, and as cash-strapped consumers cut back after Christmas.

EUR

The European Commission has raised its forecast for Eurozone growth this year, but also slashed its inflation forecast and warned that debt levels in several countries will continue to climb. In its new winter forecasts, the EC predicts that Eurozone GDP will grow by 1.2% this year – up from 1.1% before, rising to 1.8% in 2015.

The European Commission also sharply lowers inflation forecast for 2014 to 1%, from 1.5% only months ago in November forecast.

USD

Data showed home prices increased 0.8% through December. For the 12 moths of December house prices are up 13.4% just below the peak of 13.7%. Higher borrowing rates and poor weather have been blamed for the weakness.  American consumer confidence also declined to 78.1 in February from a revised 79.4 the previous month. Economists surveyed predicted a reading of 80.

China

Data released yesterday showed a surprise slowdown in Chinese house price growth, as banks curb their lending as Beijing looks to tighten credit. Today there is alarm that its currency, the yuan, has weakened; good for exporters, but possibly a sign of concern that the domestic economy is weakening.

Today

We could see some pound volatility early this morning as we have UK GDP figures for the final quarter of 2013 expected to in at 0.7%. For the entire year GDP is expected to come in at 2.8%. Total business investment is also for Q4 2013 is also set to be released at 9.30.

Later on in the trading day at 15.00pm we have January US new home sales expected to show a slight decline of 400,000 from 414,000 in December. 

Key Announcements:

9.30am – GBP – GDP (Q4): Expected to drop to 0.7%.

9.30am – GBP – Total Business Investment (Q4): Expected to rise to 2.6%.

15.00pm – USD – New Home Sales (Jan): Expected to fall to 400,000.