With the holiday season now in full swing, trading is light and markets susceptible to swings on low volumes. The news from the Nationwide Building Society that house prices have slid by nearly 4% during the past year as the highest mortgage rates for 15 years deter buyers, hardly had any immediate effect, though. Perhaps investors are more concerned with what might have happened to the British summer. Let’s face it, July was something of a wash out.
But to return to the topic of higher interest rates, the pain could worsen further, with the Bank of England having announced a further rise to 5.25%. This was less than originally feared, but is not likely to be the end of the story as forecasters are pencilling in a likely increase at the September meeting also. It is, of course, an ill wind that blows nobody any good. HSBC’s jump in profits reported recently demonstrates that banks at least appear to be benefitting from dearer money.
This raises a fresh controversy as these financial institutions have been accused of being all too swift in putting up rates to borrowers, but rather more reluctant to pass on these higher rates to savers. The regulators are starting to look at whether bank customers are being treated fairly, so we could see a more competitive savings market developing. With Parliament now taking an interest in how they behave, banks could be in for added scrutiny over coming months.
Crossing to the other side of the pond, the United States has received an embarrassing and unwelcome downgrade to its debt from the ratings agency, Fitch. Needless to say, the White House dismissed these findings, but it did rather unsettle Wall Street and our own market felt similarly challenged. And as if this wasn’t enough, President Trump is on the receiving end of yet another inditement. Next year’s Presidential election could prove to be very interesting indeed.
Elsewhere, company results have been a recent positive feature, with BP and drinks giant Diageo announcing recently. The market greeted these figures – and HSBC’s numbers – with quiet enthusiasm initially, despite the large drop in profits announced by BP, though the market cooled in subsequent trading. Short of any unexpected news, the pattern looks like being a good day or two, followed by a couple of bad days. Let’s hope the weather improves sufficiently for us to enjoy the summer holidays so we can forget about markets for the time being.
