FTSE Lower; House builders hit on falling property prices

The FTSE joined global indices trading in the red as traders shied away from riskier assets. Weakness in house builders and miners, and a softer start on Wall Street overshadowed the benefits of the sinking pound.  The FTSE headed towards the close down 0.2%, a much better performance that the Dax which was off over 1.5%.

House price growth slumping to its lowest level since 2013, hit demand for the house builders. Annual house price growth declined to 1.7% in January down from 2.2%, the fastest rate of decline since 2009. Persimmon, Taylor Wimpey and Berkley Group all shed over 2%.

Slowing house price growth is just the latest evidence of Brexit impacting the economy. Since the referendum the housing market has as good as ground to a halt as potential buyers adopt a wait and see approach. These figures come hot on the heels of ONS data which forecasts a slowing growth over the next few years.

With Brexit uncertainty expected to continue for the coming months the property market and house builder stocks are unlikely to stage any meaningful comeback.

Pound staging recovery after May’s 3 month extension request

The pound was reflecting Brexit headlines. As Theresa May requested a short extension of just 3 months from Brussels, the pound fell to a session low of 1.3147. The fact that the pound is clawing back those losses is rather surprising given how close we are to a no dal Brexit. Brussels have not yet granted the extension to Article 50 and are not considering it until next week, just days before the UK is due to leave. Furthermore, Eurosceptics could now be tempted to run down the clock towards a no deal. The UK is a step closer to a no deal Brexit which explains the selloff. However, the fact that the pound remains above $1.30 suggests that traders remain optimistic that a no deal will be avoided.

FOMC in focus

Wall Street opened on the back foot, following the global trend lower. The reported souring of US – Sino trade talks weighed on sentiment. Investors also looked ahead to the Fed’s policy announcement later this evening. The Fed are broadly expected to keep rates on hold so all eyes will be on the dot plot. The dot plot currently points to 2 hikes across the year, this is expected to be reduced to one amid weaker economic data. The dollar index has already lost 0.9% across the past 10 days pricing in a dovish Fed. We don’t expect the dollar to fall much further unless the Fed doubles down on its dovish rhetoric.