5th May 2021
Good morning One of the scientists behind the first lockdown says he's now optimistic that life could feel a lot like normal by early summer. Good news for those of us ready to get back to socialising, not so good news if we have to go back to the rush hour commute... Here are the stories you need to know in less than 5 minutes.
Yesterday's market moves
FTSE 100 -0.7% 6,923
FTSE 250 -0.7% 22,330
£/$ -0.3% 1.39
£/€ -0.1% 1.15
The FTSE100 briefly went over the magic figure of 7,000 but this was short lived as it ended the day down 0.7%. With comments from the US Treasury Secretary Janet Yellen that interest rates may need to rise putting a dampener on investor optimism - markets generally don’t like higher interest rates as it makes borrowing and therefore spending more expensive.
Mortgage borrowing reaches record high
The rush to buy a new home before the stamp duty relief ends pushed mortgage borrowing to a new high in March. Borrowing was £11.8bn, the strongest since records began in 1993. The high level was driven by the expected ending of the stamp duty tax relief at the end of March, it’s now been extended to the end of June.
Why does it matter
This is further evidence that the UK housing market is hotting up, last week Nationwide Building Society reported that the average home is now worth £239k, that’s an increase of £16k in one year. We all know that owning a home is almost a national obsession and the government has tried over the years to help people achieve this goal. The latest initiative announced last month was a government backed scheme that allows first time buyers to buy a home with a 5% deposit.
On the surface this sounds helpful but there are concerns that at some point property prices will have to come down and this could be with a crash. This could be triggered by when the stamp duty holiday ends or if in interest rates or unemployment increases. But given how core the housing market is to the UK consumer confidence its likely that the government and Bank of England will do all they can to avoid this.
The Bank of England publishes stats on consumer lending every month and they give a real insight into how consumers are feeling about their personal finances. It’s been well documented that many households have saved a lot of cash since the start of the pandemic (£100bn!). And this cash is being used to pay off credit card debt and loans - over £20bn repaid since March 2020 and to put towards a deposit for a house.
UK and India agree £1bn trade deal
The UK and India have signed new trade and investment deals worth £1bn. The package contains over £533m of new Indian investment into the UK, which is expected to create more than 6,000 jobs in vital and growing sectors such as health and technology.
The deal is expected to allow British products such as apples, pears and quince into the Indian market for the first time. The deal is seen as a first step towards creating a free trade agreement i.e. trading with no tariffs, between the two countries. Trade between the UK and India is already worth about £23bn per year, and the government hopes to double that by 2030.
Why does it matter
Since Brexit the government has been working on trying to replace the 500 million consumer shaped hole left by leaving the EU free trade area. With almost 1.4 billion people, India’s population is bigger than the EU and US combined and by far the largest market the UK has committed to negotiating a trade deal with to date.
India is the 6th largest economy in the world and also one of the fastest growing (expected to grow 10% this year) so it makes sense that the UK is trying to build closer ties.
In a post Brexit world we can expect to hear more about trade deals between the UK and other countries. Those who supported the UK leaving the EU will say that we’re well placed to negotiate better deals with the rest of the world. But trade deals are notoriously tricky to thrash out, for example the EU has only just restarted talks for an agreement with India that stalled back in 2013.
Covid-19 Vaccine Update
- In the past 24 hours 79k UK adults have had first dose and 129k have had second dose.
- This means 65.8% of UK adults have had at least one dose of a vaccine, 29.7% of adults have had two doses.
Meanwhile, The Wall Street Journal has reported that vaccines are being developed that could be taken as pills or nasal sprays, instead of using needles. These would be easier to store and transport than current vaccines, and could possibly lead to longer-lasting immune responses.
Other stories to keep you in the loop
Stat of the day
The big 5 tech companies – Facebook, Amazon, Apple, Microsoft and Google make up ~25% of the total value of the S&P 500 - 2x the share from 5 years ago