UK house sales slide after stamp duty holiday cut; FTSE 250 at new high – as it happened

Property sales in the UK more than halved last month, after a surge to complete sales before the stamp duty holiday was scaled back.

Tax office HMRC estimates that there were 82,110 residential transactions in July. That’s a fall of 61.5% compared with June, when the number of homes changing hands in the UK hit a record of 213,120 sales.

HMRC says the figures show the impact of the temporary cut to stamp duty, introduced in 2020 to stimulate demand in the property sector.

Significant forestalling activity by taxpayers was captured within June 2021 UK residential transactions statistics. Since then, an expected but noticeable decrease has been observed within provisional July 2021 UK residential transactions statistics.

Forestalling is when advanced action is taken to prevent an anticipated event. For these statistics, forestalling refers to taxpayers completing property transactions earlier to take advantage of government housing market policies.

Until 30 June, homeowners in England and Northern Ireland could avoid paying stamp duty on the first £500,000 of a purchase, while in Wales the threshold was £250,000.

The limit has now been halved in England and Northern Ireland until the end of September, and ended in Wales.

On a seasonally adjusted basis, 73,740 homes were sold in July, 63% fewer than in June.

Housing experts are predicting that transactions will jump again next month, before the stamp duty holiday finally ends in England and Northern Ireland.

Mike Scott, chief analyst at estate agency Yopa, says:

“Given the number of sales that were brought forward, this is a high number and suggests that the dip in the number of sales following the removal of many of the tax savings will be short-lived.

At Yopa we expect another very strong month in September, before the new deadline for the remainder of the stamp duty holiday, followed by another short-lived dip. The housing market remains very active, and we are seeing little sign of any slowing down, even though it is now too late for a new buyer to beat that September deadline.

Overall, we expect that there will be close to 1.5 million completed home sales in 2021, which will be a nearly 50% increase on the pandemic-affected 2020 number, and the highest figure since 2007.”

Paul Stockwell, chief commercial officer at Gatehouse Bank, also predicts a cliff edge next month:

“It is no surprise that July saw a significant slump in transactions compared to June’s spectacular highs. A record number of buyers had been eager to complete their sale before the stamp duty deadline.

“Transactions may creep up again in August and we can expect another flurry of activity in September as buyers try to complete sales before the final stamp duty savings are removed. This wave is unlikely to match June’s in scale but the effect of the cliff-edge will still be in attendance.

Oil is still higher, as vaccine optimism and easing anxiety about the US slowing its stimulus package continues to boost sentiment.

Brent crude jumped by a dollar per barrel this morning to $69.76 (although it’s slipped back a little), adding to the $3.50 gained yesterday.

Ipek Ozkardeskaya, senior analyst at Swissquote, says investors anticipate the US central bank will be reluctant to taper its huge bond-buying scheme too early.

On Friday, Dallas Federal Reserve (Fed) President Robert Kaplan said that the rising Covid cases and the economic tensions that come along with it brings him to adjust his view about the idea of pulling away the Fed stimulus. He now thinks it may not be the right time. And, that’s exactly what the market was hoping to hear from a member who, so far, was backing a sooner-than-otherwise Fed tapering.

Kaplan’s dovish comments, combined with soft July PMI data [yesterday] boosted the Fed doves ahead of Jerome Powell’s Jackson Hole speech and sent US indices to fresh records.

I believe the cheery mood across the US equities is here to stay in the run up to the Jackson Hole meeting, as the Fed Chair Jerome Powell could only soften the hawkish tone of last week’s FOMC minutes.

The rising Covid cases and the soft data can only keep the Fed alert and reluctant to act prematurely. And that’s all the market wants to hear.

Supply chain problems have hit McDonald’s, with the restaurant chain’s deliveries of milkshakes and bottled drinks reportedly running dry in the UK.

The Independent newspaper got the story, writing last night that:

McDonald’s has become the latest restaurant chain to be hit by supply chain shortages, with no milkshakes or bottled drinks currently available in any of its British outlets.

The fast-food chain, which operates around 1,250 restaurants in England, Scotland and Wales, has had to stop supplying the drinks this week but said it was “working hard to return these items to the menu as soon as possible”.

The issues are thought to be caused by a shortage of lorry drivers.

A spokesperson for McDonald’s told The Independent: “Like most retailers, we are currently experiencing some supply chain issues, impacting the availability of a small number of products. Bottled drinks and milkshakes are temporarily unavailable in restaurants across England, Scotland and Wales.

“We apologise for any inconvenience, and thank our customers for their continued patience. We are working hard to return these items to the menu as soon as possible.”

More here: McDonald’s runs out of milkshakes and bottled drinks due to supply chain disruption

McDonald’s is hardly alone, of course, in suffering from the UK’s shortfall in lorry drivers and other workers blamed on both the pandemic and Brexit.

Last week, Nando’s was forced to temporarily close one in 10 of its restaurants amid a chicken shortage. It blamed staffing shortages at suppliers and a reduced number of lorry drivers.

Convenience store group McColl’s warned earlier this month that the shortage of lorry drives in the UK could hit its profits.. as business groups urge the government to grant temporary work visas to heavy goods vehicle drivers from the EU (a request that has been so far rebuffed, with the UK favouring training more Britons who want to be hauliers.)

24 Aug 202104.36 EDT

Jasper Jolly

Shares in Deliveroo have pushed higher this morning, up 1.2%, after launching a trial to deliver pharmacy products from Boots as it looks to expand beyond restaurant orders.

Stores in London, Birmingham, Edinburgh and Nottingham will be among the 14 initially available in the trial as part of a pilot scheme launching on Tuesday, my colleague Jasper Jolly writes.

The deal will mean customers will be able to order medicines and painkillers for milder ailments such as coughs, colds and hay fever for home delivery. Makeup, toiletries, baby products and snacks will also be among the 400 products initially available from US-owned Boots, which is Britain’s largest pharmacy chain.

If the Boots deal is rolled out nationwide it would add to Deliveroo’s growing business delivering groceries and other products beyond takeaway food orders.

Deliveroo shares are up 4.6p at 393.8p, back over their IPO price of 390p (they rose over 396p last week, recovering from one of the worst City floats in memory).

Chris Hunt, head of retail at law firm Gowling WLG, says the tie-up could help to scale up the UK’s on demand marketplace.

While a significant products and services gap still needs to be closed within the UK on demand market when compared to the advancements made in other countries, this is a promising sign of change.

Aside from Deliveroo providing localised offerings from independent retailers, there is little on a larger scale that falls outside of the ‘takeaway’ category - so the Boots partnership could potentially open the flood gates for others.

Germany’s economy grew faster than first estimated in the last quarter, as consumers spent some of their pandemic savings as Covid-19 restrictions were relaxed.

German GDP grew by 1.6% in April-June, statistics body Destatis reports, up from an initial estimate of 1.5%. That follows a 2% contraction in Q1, when the country was in lockdown.

Domestic demand drove the recovery, with household spending jumping 3.2% as shops and hospitality venues reopened this spring.

State spending to fight the pandemic also boosted growth, with government expenditure up 1.8%.

Exports lagged, though, up only 0.5% during the quarter while imports rose 2.1%.

This leaves Germany’s economy 3.3% below its pre-pandemic levels (in Q4 2019).

Despite this upgrade, Germany still grew slower than the wider eurozone, which grew by 2% in Q2.

The UK expanded by a pacier 4.8% in April-June [but was still 4.4% smaller than in Q4 2019].

Carsten Brzeski of ING warns that the global supply chain problems are hurting Germany:

The rebound of the German economy was weaker than in many other eurozone countries as the manufacturing sector suffered from supply chain problems.

In fact, the economy showed two faces in the second quarter. One of strong domestic demand with private consumption increasing by 3.2% QoQ and government spending up by 1.8% and one of almost sluggish investment and exports (both up by 0.5% QoQ each). Of all components, only government spending has currently returned to pre-crisis levels.

Brzeski adds that these supply chain frictions, rather than the coronavirus, are the biggest risk for the German economy in the second half of the year, adding:

We still expect the German economy to return to pre-crisis levels before the end of the year. However, to really get there, the current supply chain frictions must not last for too long.

More here.

The latest COVID-19 data from the UK are encouraging, writes Adam Cole of RBC Capital Markets this morning:

The latest batch of COVID-19 data from the UK government confirm two things.

Firstly, the rate of inflections is trending higher again, albeit at a slower pace than was the case in early-July. Secondly, that hospitalisations and deaths remain much lower, given the level of inflections, than was the case during the last wave, which peaked in January.

Compared to that time (and allowing for time lags) hospitalisations are around 70% lower than would have been associated with recent levels of infections and deaths are similarly around 70% below that associated with recent hospitalisations. This is encouraging not just for the UK, but for other highly-vaccinated countries that are at an earlier stage of the delta variant becoming the dominant strain.

Deaths from Covid-19 are now averaging 100 a day across the UK - the highest since March, as the pandemic continues to claim lives. That’s much lower than in the early wave, before the successful vaccination programme.

Scientists have warned that case rates will jump again when millions of pupils return to schools next week (they’re already rising sharply in Scotland, where the new term has already begun).

And that could lead to measures such as face masks being reintroduced, if hospitalisations also increase this autumn. Here’s the full story:

European stock markets all all higher this morning too, with the Stoxx 600 index up 0.3%.

As in London, travel and leisure, technology and mining stocks are among the main risers, following those gains in Asia-Pacific markets after Wall Street’s rally.

Britain’s FTSE 100 index of blue-chip stock has opened a little higher - gaining 11 points, or 0.15%, to 7120 points.

Travel and hospitality firms are among the risers, with British Airways parent company IAG up 1.4%, and hotel operator Whitbread gaining 1.1%.

Among smaller companies on the FTSE 250, cruise operator Carnival are up 2.5%, and ticketing firm Trainline has gained 2.8%.

Technology-focused investment trust Scottish Mortgage are the top FTSE 100 riser (+2%) - lifted by the Nasdaq hitting a record high last night.

Miners are also stronger, with Glencore gaining 1%, as the weaker dollar pushed up commodity prices. Housebuilders - a gauge of UK growth prospects - are also higher, with Persimmon up 1%.

The news that Pfizer’s two-dose Covid-19 vaccine has received full approval from the US FDA is helping to cheer investors, says Richard Hunter, Head of Markets at interactive investor:

“Investors have for the moment reverted to the glass half-full mentality, with buying interest in big tech propelling the Nasdaq to a record closing high.

Sentiment was also buoyed by the US Food and Drug Administration granting full approval for the Pfizer/BioNTech Covid-19 vaccine, prompting hopes that the level of inoculations could be accelerated as a result. The Delta variant has become a drag on economic recovery generally and measures to mitigate its impact will have positive effects.

After jumping a cent yesterday, the pound has added to yesterday’s gains against the US dollar.

Sterling is up another 0.2 cents at $1.3740, rising away from last week’s one-month low.

The dollar has been easing back generally, as investors reassess the prospect of the Federal Reserve slowing the pace of its $120bn/month bond-buying stimulus.

The markets had been expecting Fed Chair Jerome Powell to pencil in a timeline for winding down the Fed’s bond-buying program in his speech at the Jackson Hole Symposium later this week (a gathering of top central bankers, policymakers and economists in a Wyoming ski resort).

But now, tapering may be slipping further off the horizon, as policymakers wonder how much damage the Delta variant is causing.

Dallas Fed President Robert Kaplan, a hawkish policymaker, said last week he might reconsider his stance if the virus harms the economy.

This has knocked the US dollar index lower against other currencies too, such as the Australian dollar:

As Thomas Hayes, managing member at Great Hill Capital, puts it (via Reuters):

“There was a fear that they were going to announce tapering in Jackson Hole and start in September. But it now looks that will be in 2022.”

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Global markets are in an upbeat mood this week, as investors shake off last week’s jitters that central banks will start tapering their emergency Covid-19 support packages soon.

Oil rallied strongly yesterday, and is adding to those gains this morning, after America’s drug regulator granted full approval to Pfizer/BioNTech Covid-19 vaccine.

The move is likely to lead to a wave of formal vaccine requirements from government departments, businesses, schools and other bodies -- potentially speeding up the US coronavirus vaccination rates and boosting fuel demand.

Crude oil prices surged by 5% on Monday -- the most in nine months -- and stocks on Wall Street hit fresh record highs, following the US Food and Drug Administration’s move.

Brent crude has now risen back over $69 per barrel, up from a three-month low of $65 at the end of last week.

And that mood has fed through to Asia-Pacific markets, where stocks are adding to Monday’s gains. Japan’s Nikkei has gained 0.9%, China’s CSI 300 is up 1.1%, and South Korea’s KOSPI 200 has rallied almost 2%.

Europe is expected to open a little higher too:

Michael Hewson of CMC Markets says the turnaround in sentiment is quite startling:

Barely days after the markets were freaking out about a slowing global economy, vaccine durability and an increasing determination on the part of China to pour sand in the wheels of its own recovery story with various crackdowns on parts of its own economy, global stocks have rebounded strongly at the start of the week.

Yesterday’s price moves, particularly where US markets, oil prices and the US dollar are concerned, have been almost whiplash inducing in the context of what we saw with last week’s price moves.

The rally comes despite signs that global growth may be cooling. Yesterday, we learned that UK private sector growth has hit a six-month low in August, as businesses suffered the worst shortages of workers and materials in decades.

In the US, activity is rising at the slowest rate this year, as rising cases of the Delta variant, supply shortages and capacity pressures all hit the recovery.

This is helping to ease worries that the US Federal Reserve might rein in its bond-buying stimulus programme soon.

As Jim Reid of Deutsche Bank told clients, central bankers may be more cautious about tapering (or slowing) their QE programmes.

After a fairly poor performance for risk assets last week, yesterday saw a sizeable rebound as optimism returned to markets once again, with the S&P 500 (+0.85%) finishing a miniscule -0.004% away from its all-time closing high. In some ways it was a surprising outcome, particularly given the weaker-than-expected numbers from the flash PMIs, but there seemed to be increasing optimism that the weakening outlook might actually lead to a more cautious attitude by central bankers when it comes to withdrawing monetary policy support.

On top of that, there have also been some more promising signs on the pandemic, with the data at a global level indicating that the number of new cases are beginning to plateau following 9 successive weekly increases. That may not be much consolation with case rates still at high levels, but given consumers have become more cautious in a number of key economies, the fact that we’re seeing some sort of stabilisation in case rates offers hope that matters aren’t set to dramatically worsen.

The agenda

• 1pm BST: Hungary’s central bank’s interest rate decision
• 3pm BST: US new home sales for July
• 3pm BST: Richmond Fed Manufacturing Index for August