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Moody's issues warning over UK consumer credit as borrowing hits £200bn - business live Moody's issues warning over UK consumer credit as borrowing hits £200bn - business live
(35 minutes later)
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The weak dollar has also seen the euro gain ground against the US currency:
Euro trades above $1.18 for first time since January 2015 (July 31, 2017) pic.twitter.com/7dc80a3dYM
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Sterling hits new 10 month highSterling hits new 10 month high
Sterling has hit a new 10 month high against the dollar, as the US currency continues to struggle with the uncertainties caused by the actions and comments from the president.Sterling has hit a new 10 month high against the dollar, as the US currency continues to struggle with the uncertainties caused by the actions and comments from the president.
The pound is currently up 0.35% at $1.3178, having earlier hit $1.32 for the first time since 16 September. Neil Wilson, senior market analyst at ETX Capital, said:The pound is currently up 0.35% at $1.3178, having earlier hit $1.32 for the first time since 16 September. Neil Wilson, senior market analyst at ETX Capital, said:
Sterling jumped to fresh 10-month highs as the end of month 4pm fix sent cable higher. The pound exploded higher to $1.31999, having the briefest of flirts with the $1.32 handle before easing back. The move came as the dollar heads for its worst month since January. Cable is now trading at its highest since mid-September 2016 on this sustained bout of dollar weakness. Clearly it’s all to do with Donald Trump saying it was too strong and the market having confidence in him…more likely it is the exact opposite – concerns about the chaos in Washington and a complete lack of faith in the administration delivering any kind of meaningful economic or fiscal reforms.Sterling jumped to fresh 10-month highs as the end of month 4pm fix sent cable higher. The pound exploded higher to $1.31999, having the briefest of flirts with the $1.32 handle before easing back. The move came as the dollar heads for its worst month since January. Cable is now trading at its highest since mid-September 2016 on this sustained bout of dollar weakness. Clearly it’s all to do with Donald Trump saying it was too strong and the market having confidence in him…more likely it is the exact opposite – concerns about the chaos in Washington and a complete lack of faith in the administration delivering any kind of meaningful economic or fiscal reforms.
There is also growing doubt that the US Federal Reserve will be in a position to raise interest rates again in the immediate future.There is also growing doubt that the US Federal Reserve will be in a position to raise interest rates again in the immediate future.
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Oil slips back following Opec reportOil slips back following Opec report
After its earlier gains on Venezuela’s problems, the oil price is now on the slide.After its earlier gains on Venezuela’s problems, the oil price is now on the slide.
Opec crude output rose by 90,000 barrels a day this month to a high for the year, according to Reuters, as supplies from Libya continued to recover.Opec crude output rose by 90,000 barrels a day this month to a high for the year, according to Reuters, as supplies from Libya continued to recover.
So, ahead of a meeting next week between Opec and non-Opec producers, Brent crude is now down 0.4% at $52.28 a barrel, having earlier reached a peak for the day of $52.92.So, ahead of a meeting next week between Opec and non-Opec producers, Brent crude is now down 0.4% at $52.28 a barrel, having earlier reached a peak for the day of $52.92.
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Back with the UK consumer credit figures, and TUC general secretary Frances O’Grady has called for the government to take action:Back with the UK consumer credit figures, and TUC general secretary Frances O’Grady has called for the government to take action:
Wages are still lower than before financial crisis, so it’s no wonder that families are being forced deeper and deeper into debt.Wages are still lower than before financial crisis, so it’s no wonder that families are being forced deeper and deeper into debt.
If working people don’t see extra cash in their pocket, borrowing will continue to spiral. Setting aside mortgages, household debt is likely to hit an all-time high this year.If working people don’t see extra cash in their pocket, borrowing will continue to spiral. Setting aside mortgages, household debt is likely to hit an all-time high this year.
The government needs to boost investment to get wages rising again. They should start by ending public sector pay restrictions and putting the minimum wage up to £10 as soon as possible.The government needs to boost investment to get wages rising again. They should start by ending public sector pay restrictions and putting the minimum wage up to £10 as soon as possible.
Meanwhile Elliott Silk, Head of Commercial at Sanlam UK, said:Meanwhile Elliott Silk, Head of Commercial at Sanlam UK, said:
The Bank of England’s actions to curtail the growth of unsecured loans has had some impact, but more action is needed. While consumer credit accounts for a fraction of household debt, people are much more likely to default on unsecured loans. A lot of this has to do with understanding the area – there is a lack of financial education on the national curriculum, which means young people often come out of education naïve to the negative consequences of unsecured loans and personal debt. Companies also have a large part to play in the financial wellbeing of their employees – otherwise, they too will feel the negative impact that financial stress can have on employee performance.The Bank of England’s actions to curtail the growth of unsecured loans has had some impact, but more action is needed. While consumer credit accounts for a fraction of household debt, people are much more likely to default on unsecured loans. A lot of this has to do with understanding the area – there is a lack of financial education on the national curriculum, which means young people often come out of education naïve to the negative consequences of unsecured loans and personal debt. Companies also have a large part to play in the financial wellbeing of their employees – otherwise, they too will feel the negative impact that financial stress can have on employee performance.
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Bank of England strike to go ahead - PA reportBank of England strike to go ahead - PA report
The Press Association is reporting some bad news for Bank of England governor Mark Carney ahead of this week’s monetary policy meeting:The Press Association is reporting some bad news for Bank of England governor Mark Carney ahead of this week’s monetary policy meeting:
#Breaking Three-day strike by Bank of England workers to go ahead from Tuesday after talks end without agreement, Unite union says#Breaking Three-day strike by Bank of England workers to go ahead from Tuesday after talks end without agreement, Unite union says
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US markets continue to be buoyant, despite a relatively quiet day in terms of economic and corporate news. But there is a lot coming up this week for investors to get their teeth into, which could well provide some volatility. Connor Campbell, financial analyst at Spreadex, said:US markets continue to be buoyant, despite a relatively quiet day in terms of economic and corporate news. But there is a lot coming up this week for investors to get their teeth into, which could well provide some volatility. Connor Campbell, financial analyst at Spreadex, said:
There wasn’t all that much to drive the index higher this Monday, with investors perhaps enjoying the calm before the storm of data and earnings brought by the first few days of August.There wasn’t all that much to drive the index higher this Monday, with investors perhaps enjoying the calm before the storm of data and earnings brought by the first few days of August.
Tuesday’s Markit and ISM manufacturing PMIs are joined by Fed-favourite inflation gauge the core PCE price index and, most crucially, Apple’s latest earnings update. Wednesday then has the ADP employment change reading, before Thursday’s double dose of services PMIs and, finally, Friday’s non-farm jobs report. In other words, plenty to challenge the Dow’s recent rise.Tuesday’s Markit and ISM manufacturing PMIs are joined by Fed-favourite inflation gauge the core PCE price index and, most crucially, Apple’s latest earnings update. Wednesday then has the ADP employment change reading, before Thursday’s double dose of services PMIs and, finally, Friday’s non-farm jobs report. In other words, plenty to challenge the Dow’s recent rise.
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The Dallas Federal Reserve manufacturing activity index has climbed from 15 in June to 16.8 in July, much better than the expected fall to 13.The Dallas Federal Reserve manufacturing activity index has climbed from 15 in June to 16.8 in July, much better than the expected fall to 13.
The production index, a key measure of state manufacturing conditions, rose 11 points to 22.8, indicating output grew at a faster pace than in June, said the Dallas Fed.The production index, a key measure of state manufacturing conditions, rose 11 points to 22.8, indicating output grew at a faster pace than in June, said the Dallas Fed.
But the positive data, there were more mixed responses from respondents:But the positive data, there were more mixed responses from respondents:
Business is good, not great. We are busy.Business is good, not great. We are busy.
The foreign competition for new equipment is extremely competitive and our company is not able to match their selling prices.The foreign competition for new equipment is extremely competitive and our company is not able to match their selling prices.
Things are going poorly in the economy. We have no projects, and business is slow.Things are going poorly in the economy. We have no projects, and business is slow.
We are experiencing the summertime blues. Business is very dull July to date.We are experiencing the summertime blues. Business is very dull July to date.
Washington, D.C., is still a significant contingent factor for a better or worse outlook. Prospects for better are dimming.Washington, D.C., is still a significant contingent factor for a better or worse outlook. Prospects for better are dimming.
The increases in business are small but measurable. We have been trying to add employees over the last six months, with no qualified candidates available.The increases in business are small but measurable. We have been trying to add employees over the last six months, with no qualified candidates available.
I cannot explain it, but we are slower than we have ever been at this time and it seems like we are not the only ones.I cannot explain it, but we are slower than we have ever been at this time and it seems like we are not the only ones.
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Next on the agenda are the latest US housing figures, which have come in better than expected.Next on the agenda are the latest US housing figures, which have come in better than expected.
Pending home sales bounced back in June after three months of decline. The National Association of Realtors said that its index of contracts to buy previously owned homes jumped1.5% to a reading of 110.2. This was higher than the 0.7% rise that analysts had been forecasting. But the market remains limited by the number of houses available to buy.Pending home sales bounced back in June after three months of decline. The National Association of Realtors said that its index of contracts to buy previously owned homes jumped1.5% to a reading of 110.2. This was higher than the 0.7% rise that analysts had been forecasting. But the market remains limited by the number of houses available to buy.
Lawrence Yun, the NAR chief economist said:Lawrence Yun, the NAR chief economist said:
The first half of 2017 ended with a nearly identical number of contract signings as one year ago, even as the economy added 2.2 million net new jobs.The first half of 2017 ended with a nearly identical number of contract signings as one year ago, even as the economy added 2.2 million net new jobs.
Market conditions in many areas continue to be fast paced, with few properties to choose from, which is forcing buyers to act almost immediately on an available home that fits their criteria.Market conditions in many areas continue to be fast paced, with few properties to choose from, which is forcing buyers to act almost immediately on an available home that fits their criteria.
Low supply is an ongoing issue holding back activity. Housing inventory declined last month and is a staggering 7.1 percent lower than a year ago.Low supply is an ongoing issue holding back activity. Housing inventory declined last month and is a staggering 7.1 percent lower than a year ago.
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The fall in the Chicago PMI follows five straight months of rises, and is the lowest level for three months. Jamie Satchi, economist at MNI Indicators which helps compile the report, said:The fall in the Chicago PMI follows five straight months of rises, and is the lowest level for three months. Jamie Satchi, economist at MNI Indicators which helps compile the report, said:
MNI’s July Chicago Business Barometer should be viewed in the context of the underlying, upward trend in business sentiment witnessed since early 2016. Key indicators, despite reversing their June reading, remain above their respective averages set over the last twelve months, and point towards robust confidence among U.S firms.MNI’s July Chicago Business Barometer should be viewed in the context of the underlying, upward trend in business sentiment witnessed since early 2016. Key indicators, despite reversing their June reading, remain above their respective averages set over the last twelve months, and point towards robust confidence among U.S firms.
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Still with the US and there is a smidgen of data due.Still with the US and there is a smidgen of data due.
First comes the Chicago Purchasing Managers Index, which has come in lower than expected, down from 65.7 in June to 58.9 in July.First comes the Chicago Purchasing Managers Index, which has come in lower than expected, down from 65.7 in June to 58.9 in July.
USA Chicago PMI announcement - Actual: 58.9, Expected: 60.0 pic.twitter.com/gpa4ER5TGyUSA Chicago PMI announcement - Actual: 58.9, Expected: 60.0 pic.twitter.com/gpa4ER5TGy
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Dow hits new high as Wall Street opensDow hits new high as Wall Street opens
Optimism about US company earnings has helped push Wall Street higher once more.Optimism about US company earnings has helped push Wall Street higher once more.
The Dow Jones Industrial Average has hit a new intraday peak of 21,885, while the Nasdaq Composite and S&P 500 are both on the rise in early trading. So far around 73% of major companies reporting results have beaten expectations, and Apple is the next big name to come under the spotlight, with its results due after the market closes on Tuesday.The Dow Jones Industrial Average has hit a new intraday peak of 21,885, while the Nasdaq Composite and S&P 500 are both on the rise in early trading. So far around 73% of major companies reporting results have beaten expectations, and Apple is the next big name to come under the spotlight, with its results due after the market closes on Tuesday.
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Thurday sees the Bank of England’s latest interest rate and monetary policy decisions, and ING Bank has been looking at the possibilities. And they have felt moved to drag in Game of Thrones for some reason:Thurday sees the Bank of England’s latest interest rate and monetary policy decisions, and ING Bank has been looking at the possibilities. And they have felt moved to drag in Game of Thrones for some reason:
1.05pm BST1.05pm BST
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UK consumer borrowing hits £200bnUK consumer borrowing hits £200bn
Katie AllenKatie Allen
In another important development, UK consumer borrowing is back above £200bn for the first time since the financial crash.In another important development, UK consumer borrowing is back above £200bn for the first time since the financial crash.
That’s according to the latest Bank of England figures, released this morning.That’s according to the latest Bank of England figures, released this morning.
Unsecured consumer credit, which includes credit cards, car loans and overdrafts, grew by 10% in the year to June, to £200.9bn. It was the first time the outstanding debt had gone above £200bn since the peak of the global financial crisis in 2008.Unsecured consumer credit, which includes credit cards, car loans and overdrafts, grew by 10% in the year to June, to £200.9bn. It was the first time the outstanding debt had gone above £200bn since the peak of the global financial crisis in 2008.
The pace of growth in consumer credit did ease off slightly in June, going up by £1.5bn on the month after £1.8bn in May.The pace of growth in consumer credit did ease off slightly in June, going up by £1.5bn on the month after £1.8bn in May.
Ruth Gregory, UK economist at the consultancy Capital Economics said the 10% rise on the year would still be concerning for the Bank.Ruth Gregory, UK economist at the consultancy Capital Economics said the 10% rise on the year would still be concerning for the Bank.
Gregory says:Gregory says:
“This will clearly do nothing to allay policymakers’ fears that unsecured credit is growing too quickly.“This will clearly do nothing to allay policymakers’ fears that unsecured credit is growing too quickly.
But this at least suggests that households remain confident enough in their financial position to increase borrowing to help smooth consumption, as their real incomes are temporarily squeezed by higher inflation.”But this at least suggests that households remain confident enough in their financial position to increase borrowing to help smooth consumption, as their real incomes are temporarily squeezed by higher inflation.”
12.59pm BST12.59pm BST
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Moodys issues warning over UK consumer creditMoodys issues warning over UK consumer credit
Rating agency Moody’s has sounded the alarm over Britain’s consumer credit market.Rating agency Moody’s has sounded the alarm over Britain’s consumer credit market.
It has downgraded the outlook on bonds backed by credit card customers, buy-to-let mortgages and car loans, and warned that some British borrowers will struggle to repay their debt as the economy weakens, and inflation eats into their salaries.It has downgraded the outlook on bonds backed by credit card customers, buy-to-let mortgages and car loans, and warned that some British borrowers will struggle to repay their debt as the economy weakens, and inflation eats into their salaries.
In a new report Greg Davies, Moody’s assistant vice president, says:In a new report Greg Davies, Moody’s assistant vice president, says:
“Household debt is high and still growing, leaving consumers vulnerable to an economic downturn, while higher inflation, weaker wage growth and levels of indebtedness leaves those in lower-income brackets the most exposed.”“Household debt is high and still growing, leaving consumers vulnerable to an economic downturn, while higher inflation, weaker wage growth and levels of indebtedness leaves those in lower-income brackets the most exposed.”
“An additional challenge is that households’ capacity to draw on savings to maintain consumption and/or service their consumer debts has significantly diminished.”“An additional challenge is that households’ capacity to draw on savings to maintain consumption and/or service their consumer debts has significantly diminished.”
As a result, Moody’s has downgraded the collateral outlooks on most ‘UK structured finance sectors’ to negative.As a result, Moody’s has downgraded the collateral outlooks on most ‘UK structured finance sectors’ to negative.
It believes they will perform negatively over the next 12 to 18 months.It believes they will perform negatively over the next 12 to 18 months.
Structured finance is the process of taking a large number of individual loans, packaging them into a single security, and selling it to investors. In theory, this allows investors to get a guaranteed income stream, but with the danger of losses if the underlying loans underperform (as happened spectacularly in the subprime crisis of 2008).Structured finance is the process of taking a large number of individual loans, packaging them into a single security, and selling it to investors. In theory, this allows investors to get a guaranteed income stream, but with the danger of losses if the underlying loans underperform (as happened spectacularly in the subprime crisis of 2008).
These are the areas which Moody’s is worried about:These are the areas which Moody’s is worried about:
Non-prime residential mortgages bonds: These borrowers are paying higher interest rates, and have smaller savings pots to absorb any shocks, says Moody’s.Non-prime residential mortgages bonds: These borrowers are paying higher interest rates, and have smaller savings pots to absorb any shocks, says Moody’s.
Bonds backed by the UK’s buy-to-let (BTL) sector: Bondholders could suffer losses if house prices fall, due to “the high proportion of interest-only underlying loans”.Bonds backed by the UK’s buy-to-let (BTL) sector: Bondholders could suffer losses if house prices fall, due to “the high proportion of interest-only underlying loans”.
Automobile asset-backed securities: Moody’s fears that “delinquencies are likely to rise slightly” as the economy deteriorates. It singles out the boom in Personal Contract Purchase (PCP) plans, which have allowed customers with poor credit histories to buy new cars.Automobile asset-backed securities: Moody’s fears that “delinquencies are likely to rise slightly” as the economy deteriorates. It singles out the boom in Personal Contract Purchase (PCP) plans, which have allowed customers with poor credit histories to buy new cars.
Credit card asset-backed securities: Moody’s expects delinquencies and defaults on these bonds to rise, especially if unemployment increases.Credit card asset-backed securities: Moody’s expects delinquencies and defaults on these bonds to rise, especially if unemployment increases.
Moody’s warning comes just a few hours after Britain’s Financial Conduct Authority announced it would review the booming car loan market, amid worries that consumer debt is getting out of hand.Moody’s warning comes just a few hours after Britain’s Financial Conduct Authority announced it would review the booming car loan market, amid worries that consumer debt is getting out of hand.
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Newsflash: Officials from the Bank of England and the Unite union have sat down at conciliation firm ACAS.Newsflash: Officials from the Bank of England and the Unite union have sat down at conciliation firm ACAS.
It’s a final attempt to stop a three-day walkout at the Bank, starting tomorrow, over a 1% pay offer to Unite staff.It’s a final attempt to stop a three-day walkout at the Bank, starting tomorrow, over a 1% pay offer to Unite staff.
Last-ditch talks aimed at averting the first strike at the Bank of England in more than 50 years have started @acasorguk @unitetheunionLast-ditch talks aimed at averting the first strike at the Bank of England in more than 50 years have started @acasorguk @unitetheunion
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The threat of US sanctions on Venezuela has alarmed investors, sending them racing to ditch bonds issued by Caracas.The threat of US sanctions on Venezuela has alarmed investors, sending them racing to ditch bonds issued by Caracas.
The price of long-term Venezuelan dollar bonds fell almost one cent, according to Reuters data.The price of long-term Venezuelan dollar bonds fell almost one cent, according to Reuters data.
Bonds issued by state oil firm Petróleos de Venezuela also took a tumble. It buys US light crude oil, and mixes it with its own crude to create a product for export - so any sanctions would hurt the company.Bonds issued by state oil firm Petróleos de Venezuela also took a tumble. It buys US light crude oil, and mixes it with its own crude to create a product for export - so any sanctions would hurt the company.
Meanwhile, the European Union has added its voice to the chorus of concerns over Sunday’s vote:Meanwhile, the European Union has added its voice to the chorus of concerns over Sunday’s vote:
Venezuela - EU has 'grave doubts election result can be recognised', says held in 'doubtful, often violent circumstances'Venezuela - EU has 'grave doubts election result can be recognised', says held in 'doubtful, often violent circumstances'
11.30am BST11.30am BST
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Eurozone jobs: What the experts sayEurozone jobs: What the experts say
Marc Brütsch, chief economist at Swiss Life, says the drop in eurozone unemployment shows that Europe’s economy is strengthening:Marc Brütsch, chief economist at Swiss Life, says the drop in eurozone unemployment shows that Europe’s economy is strengthening:
#Eurozone recovery reaches labour market. #Unemployment rate falls to lowest sine financial crisis #Economy #Euroland https://t.co/DJjSeLYq9Z#Eurozone recovery reaches labour market. #Unemployment rate falls to lowest sine financial crisis #Economy #Euroland https://t.co/DJjSeLYq9Z
Ken Odeluga of City Index says the data has cheered investors.Ken Odeluga of City Index says the data has cheered investors.
#EUR starts week on front foot on raft of strong data, incl. unexpected fall in Eurozone unemployment, better than forecast #inflation ^KO#EUR starts week on front foot on raft of strong data, incl. unexpected fall in Eurozone unemployment, better than forecast #inflation ^KO
But Craig Erlam of OANDA points out that the eurozone has plenty of room for improvement:But Craig Erlam of OANDA points out that the eurozone has plenty of room for improvement:
Unemployment at 9.1% is still extremely high and when you break that down by country, it becomes much higher again in some places. Core inflation is also only at 1.3% which is still well below the ECB’s target and with the currency appreciating strongly this year, downward pressures here will continue to build.Unemployment at 9.1% is still extremely high and when you break that down by country, it becomes much higher again in some places. Core inflation is also only at 1.3% which is still well below the ECB’s target and with the currency appreciating strongly this year, downward pressures here will continue to build.
The central bank should therefore tread very carefully when it comes to removing stimulus, as I expect it will.The central bank should therefore tread very carefully when it comes to removing stimulus, as I expect it will.
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In another encouraging sign, youth unemployment across the eurozone has fallen by 400,000 over the last year.In another encouraging sign, youth unemployment across the eurozone has fallen by 400,000 over the last year.
There are now 2.588 million young people out of work in the euro area, or 18.7% of the youth population, down from 21% in June 2016.There are now 2.588 million young people out of work in the euro area, or 18.7% of the youth population, down from 21% in June 2016.
The lowest youth unemployment rate is in Germany (6.7%), while the highest were recorded in Greece (45.5% in April 2017), Spain (39.2%) and Italy (35.4%).The lowest youth unemployment rate is in Germany (6.7%), while the highest were recorded in Greece (45.5% in April 2017), Spain (39.2%) and Italy (35.4%).