The aftermath of the European election results continue to be felt with the pound continuing to fall against the majority of the 16 most actively traded currencies in the foreign exchange market.
In a quiet news day in the UK, the UK Treasury revealed that 7,313 homes with a total value of £1 billion have been sold so far under the ‘Help to Buy’ mortgage scheme. In March, the scheme contributed to around 3.5% of all mortgage completions.
The Treasury report also showed that the vast majority (95%) of sales were outside London.
The Office for National Statistics reported recently that UK property prices are rising by 8% a year with prices in London rising by a massive 17%.
Meanwhile, the latest Lloyds Bank Business Barometer survey for May shows that UK businesses are both less optimistic about the economy than they were three months ago and less upbeat about their trading prospects in 2015. It is however worth bearing in mind that both measures have been fluctuating around historical high levels in recent months.
Trevor Williams, Chief Economist at Lloyds Bank Commercial Banking, highlighted how firms’ expectations for the economy and themselves had been quite volatile over the three months.
In the US, the Department of Commerce reported that US gross domestic product (GDP) fell by an annualised rate of 1% in the first quarter of 2014, a much sharper contraction than had been expected by analysts. This is the first time that the US economy has shrank since the first quarter of 2011.
Meanwhile, the US Department of Labor reported that the initial weekly unemployment claims fell by 27,000 to reach 300,000 during the week ending 24 May, a much better figure than had been expected.
The Australian dollar was the star currency of the day, rising sharply after data showed that the Australian economy seems to be weaning itself off its long dependence on the country’s mining sector.
The latest data from the Australian Bureau of Statistics showed that despite business investment falling for the second quarter in a row as the resources industry slows down, higher than expected spending in the manufacturing sector more than made up for the slowdown in the mining sector.
In addition, the Housing Industry Association reported yesterday that the level of new home sales rose by 2.9% in April.
The slowdown in China has seriously affected the country’s mining sector with the price of iron ore, a key export now trading at around US $92.94, down 28% on the year.
David de Garis, National Australia Bank senior economist said that although the headline figure was worse than expected, the details of the report were encouraging.
De Garis said "There was a big fall in mining investment which I don't think anyone would be surprised with but for manufacturing and other industries, investment was up, so that's somewhat reassuring. It's still pointing to quite a big downturn but, nevertheless, came out stronger than expected, so there are some signs of life in the non-resource industries. It's not yet filling the void but it's moving in the right direction. The Reserve Bank of Australia will be seeing this as another reason to stay on hold."
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