Sunday Morning Coming Down!                                                         05 May 2023

The 3,050 real estate and properties transactions totalled US$ 2.83 billion, during the week, ending 05 May 2023. The sum of transactions was 189 plots, sold for US$ 325 million, and 2,239 apartments and villas, selling for US$ 1.39 billion. The top three transactions were for plots of land, one in Al Thanayah Fourth, sold for US$ 14 million, and the second in Saih Suhaib 2 for US$ 11 million, and the third in Palm Jumeirah for US$ 10 million. Al Hebiah Fifth recorded the most transactions, with sixty-three sales, worth US$ 51 million, followed by twenty-two sales in Madinat Hind 4, for US$ 8 million, and sixteen sales in Jabal Ali First, valued at US$ 16 million. The top three transfers for apartments and villas were all for apartments, the first in Al Merkadh, valued at US$ 25 million, followed by a US$ 21 million sale in Jumeirah Second, and the third in Burj Khalifa for US$ 18 million. The mortgaged properties for the week reached US$ 1.00 billion, with the highest being for a plot of land in Al Barshaa South Third, mortgaged for US$ 178 million, whilst one hundred and ten properties were granted between first-degree relatives worth US$ 135 million.

Majid Al Futtaim Properties announced that it had sold a luxury mansion at Lanai Islands, in the Tilal Al Ghaf project, for over US$ 54 million, as demand for premium property continues to surge in the emirate. Lanal Island comprises only thirteen luxury villas on a private island in a 150k sq mt recreational lagoon. South African architects Saota designed the homes, with interiors by Kelly Hoppen.

With the emirate and the country fast recovering from the impact of Covid, Azizi Developments has plans to invest US$ 16.3 billion on building fifty luxury hotels and resorts, including a seven-star hotel, in Dubai. The developer reckons that this will add 20k new keys to Dubai hotel rooms over the next five years; construction will start later in 2023. The company is keen to become a major player in Dubai’s promising future as a global hub for tourism, with the Tourism Strategy 2031 aiming to leverage PPS and seeking to attract over US$ 27.2 billion in new investment in the tourism sector. This strategy will see the tourism sector’s contribution to a GDP increase to US$ 122.6 billion by 2031. The company posted that it has one hundred ongoing projects and, last year, bought a large tract of land in Dubai South to build a mixed-use development, worth about US$ 3.27 billion, to expand its portfolio of assets.

The Ministry of Energy, as usual, adjusts fuel prices in the UAE on the first day of every month. According to the government, the UAE liberalised fuel prices, introduced in August 2015, help to rationalise consumption and encourage the use of public transport in the long run and incentivise the use of alternatives. The UAE Fuel Price Committee increased May retail petrol prices, except for diesel.:

  • Super 98: US$ 0.861 – up by 5.00% on the month and up US$ 0.63 (13.74%) YTD from US$ 0.757  
  • Special 95: US$ 0.790 – up by 5.19% on the month and up 14.30% YTD from US$ 0.727
  • Diesel: US$ 0.793 – down 4.00% on the month and down 12.50% YTD from US$ 0.896
  • E-plus 91: US$ 0.809 – up by 5.34.% on the month and up 14.58% YTD from US$ 0.706

Whilst touring this week’s ATM, HH Sheikh Mohammed bin Rashid Al Maktoum noted that tourist spending in the UAE had increased by 70% to top US$ 33.0 billion, which is the highest in the region. Dubai’s Ruler also reiterated the UAE’s 2030 target of reaching 40 million visitors and increasing the sector’s contribution to the country’s GDP to US$ 122.6 billion. He commented that “our vision is to make Dubai the preferred global destination for business and investment. We seek to build on our exceptional economic achievements to open new horizons of growth,” and stressed the importance of the tourism sector, as one of the key pillars of Dubai’s economy, and a vital driver of its growth agenda over the next decade.

According to its president, Tim Clark, Emirates will deliver a strong set of annual financial results for its fiscal year ended 31 March, when results are published later this month. He noted that “we moved quickly, and we moved first, and we have a set of results which are exceptionally good this year,” as the airline was probably the first major carrier to ramp up its operations and added capacity as demand rebounded following the pandemic. In H1, ending 30 September 2022, the world’s largest long-haul airline posted a US$ 1.09 billion profit (compared to a massive US$ 1.58 billion deficit a year earlier). The airline currently has 165 aircraft on order “and probably more coming” as it continues to grow its business over the coming years and to take advantage of the increased demand for international air traffic and growth in leisure bookings.

A sure indicator that Dubai, and its travel/tourism sector, has recovered well from the impact of Covid sees flydubai carrying 50% more passengers – 3.37 million – in Q1 than in the same period in 2022. In Q1, the carrier operated 25.8k flights and saw its fleet reach seventy-six jets – all Boeing 737s.The upcoming summer period is set to see a massive traffic growth, with the local airline ramping up capacity, by 20%, to five million, to cater for the increased demand between July and September; as it will also need additional employees, it is currently undergoing a recruitment drive. New destinations include Corfu and Cagliari, whilst summer favourites such as Bodrum, Dubrovnik, Mykonos, Santorini and Tivat will be added to the schedule; flight frequency will be added to already popular destinations such as Krabi, Milan-Bergamo, Pattaya and Pisa.

The General Civil Aviation Authority has confirmed that the number of passengers travelling through the country’s airports in Q1, increased by 56.3% on the year, to 31.87 million, indicating the success of the aviation sector in restoring pre-Covid-19 passenger traffic levels. The authority is bullish about the future, noting that the national airlines’ number of destinations reached 536, including joint destinations, and had registered 894 Organisation/Operators (professional use) and around 21.3k registered unmanned aircraft for leisure (hobby). It also noted that the aviation sector in the country contributes about 14% of the GDP, compared to only up to 3% in other global aviation sectors.

On Wednesday, the US Central Bank raised its benchmark overnight interest rate to the 5.00% – 5.25% range; this was its tenth consecutive increase since March 2022. Almost in tandem, the GCC banks followed suit with the UAE raising the Base Rate applicable to the Overnight Deposit Facility (ODF) by 25bp – from 4.90% to 5.15%, effective from Thursday, 04 May 2023. It also decided to maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50bp above the Base Rate. The Central Bank of Saudi Arabia, the Central Bank of Bahrain and the Qatar Central Bank decided to raise interest rates by 25bp.

e& posted a Q1 consolidated profit of US$ 599 million, (with EBITDA at US$ 1.69 billion, at 48% margin), on the back of a 6.6% hike in revenue to US$ 3.54 billion. On a year-on-year basis, aggregate subscribers topped 164 million, including 13.9 million in the UAE – 6.0% higher. As one of its main aims is to become a leading global technology player, it sees expanding its digital offering and launching innovative new solutions and partnerships with leading technology companies as a means of driving growth.

TECOM Group PJSC posted a 34.0% Q1 increase in net income to US$ 69 million, as revenue climbed 6.0% to US$ 144 million, attributable to sustained occupancy levels and high retention rates. The creator of specialised business districts and communities also noted that Q1 occupancy increased by 7.0% on the year – its fifth consecutive quarter of growth – to 87.0%.   Last October it paid an interim US$ 55 million dividend, followed by a similar amount last month. Like many other entities, the company owes a lot to underlying business confidence in Dubai and the thriving business ecosystem in the emirate; it is also bullish on future prospects and sees revenue climbing on the back of increased rents and an expected expansion in occupancy levels to nearer 90%.

As it lowered its GCC region’s overall real GDP growth forecast, the Institute of International Finance commented that the upcoming new corporate income tax, that will be effective from 01 June 2023, will help boost the UAE’s non-hydrocarbon revenues over the next two years. That being the case, the fiscal break-even oil price will be US$ 65 per barrel – and this despite OPEC’s recently announced oil output cut; as from 01 May, the UAE has cut production by about 150k bpd to a daily total of 3.21 million barrels. The world body estimated that although oil will drop to an average US$ 85 and US$ 80, this year and next, non-hydrocarbon real growth in the country will remain strong at 4.8 %, as the local economy will be shielded from some of the tighter global financial conditions. The IIF estimates that inflation will be at 2.4% by the end of the year, driven by lower commodity prices and manufacturing unit value. It expects the 2023 fiscal surplus will drop from 10.7% to 6.7% of GDP; last year, revenues increased by 29%, driven by higher oil prices and a large increase in revenues from VAT, with spending 1.0% lower.

DAE Capital posted a 48.5% hike in Q1 profit to US$ 19 million, attributable to an increase in the size of its fleet, as revenue moved 5.8% higher to US$ 19 million. One of biggest plane leasing players on the global stage noted that other factors behind the improved results included “a strong operating environment for airlines, an improving collections and credit profile, and profitable divestment activity.” Following its Q4 2022 acquisition of Sky Fund l, the company’s fleet of owned, managed and committed aircraft, as well as those it has a mandate to manage, has grown to about five hundred aircraft. During the period, the company took advantage of interest rate volatility and repurchased US$ 205 million of its bonds. Because of problems with its Russian operations, DAE wrote off US$ 538 million on aircraft operating in the fleet of Russian airlines, indicating that it had “no way” to determine whether the aircraft it had leased to Russian aviation operators would be returned.

Having introduced new market procedures on Direct Deal Transactions in March, the DFM saw two major deals – valued at US$ 134 million for 525 million shares – involving Amanat Holdings PJSC. DDTs are off-market transactions executed outside the Order Book and are considered a type of block trade.

Dubai Financial Market posted a Q1 net profit of just under US$ 10 million – a 29.5% improvement compared to a year earlier – as revenue climbed 13.1% to US$ 24 million and total expenses rose 4.3% to US$ 14 million; revenue was split to just over US$ 11 million and under US$ 13 million – investment returns/other income and operating income. Over the period, trading value was 16.7% lower, at US$ 5.18 billion, whilst the DFM General Index ended the quarter 2.1% to the good, as the market cap rose 2.4% to US$ 162.4 billion. The market has proved a magnet for overseas investors, who held a 56% share of trading value in Q1, with net purchases of US$ 174 million, with ownership accounting for 19.0% of the market cap on 31 March 2023. 78% of new investors were from overseas, with the DFM having a total investor base of 1.185 million from 215 countries. During the period, DFM attracted 14.6k new investors, of which 78% were foreign investors, resulting in a total investor base of 1.18 million representing 215 nationalities.

The DFM opened on Monday, 01 May 2023, 53 points (1.5%) higher the previous week, gained a further 38 points (1.1%) to close the week on 3,583, by 05 May. Emaar Properties, US$ 0.08 lower the previous fortnight, nudged US$ 0.01 higher to close the week on US$ 1.63. DEWA, Emirates NBD, DIB and DFM started the previous week on US$ 0.68, US$ 3.84, US$ 1.51, and US$ 0.41 and closed on US$ 0.68, US$ 3.83, US$ 1.52 and US$ 0.42. On 05 May, trading was at 266 million shares, with a value of US$ 106 million, compared to 161 million shares with a value of US$ 113 million on 28 April.

By Friday, 05 May 2023, Brent, US$ 11.25 lower (12.3%) the previous fortnight, shed a further US$ 4.99 (5.0%) to close on US$ 75.26.  Gold, US$ 5 (0.2%) higher the previous week, gained US$ 26 (1.3%) to US$ 2,025 on 05 May 2023.

Following the Fed’s decision to raise rates again and hinting that this could be the last one in this present cycle, gold prices traded near record-high levels on Thursday, as US yields and the dollar dipped. Spot gold touched US$ 2,040 per oz, after hitting US$ 2,072, with US gold futures reaching US$ 2,050, Slightly lower increases were seen with silver, platinum and palladium rising 0.9% to US$ 25.82, 1.0% to US$ 1,060 and by 1.4% to US$ 1,411 respectively.

Despite a slide in energy prices, Shell has reported a stronger than expected Q1 profit of US$ 9.6 billion – higher than comparative figures in 2022. The energy giant announced that it would be returning US$ 4billion to shareholders, by buying back some its shares. Last year, it posted profits of US$ 39.9 billion for 2022, which was double the previous year’s total and the highest in its 115-year history, after prices spiked at the start of the war in Ukraine, touching US$ 130 a barrel but lately oil prices have dropped to around US$ 80 a barrel.

Although quarter on quarter deliveries slowed, Q1 saw Tesla reaching record highs, with 422.9k EVs hand over to customers, helped by price cuts; the numbers were 36% higher compared to a year earlier and 4% higher on the quarter. In Q1, Tesla delivered 6% more of its mainstay Model 3/Model Y vehicles on the quarter but there was a 38% slump in numbers for its higher-priced Model X/Model S vehicles slumped by 38%.

In a move that may well disrupt air travel, US authorities have confirmed that it was going ahead with its 01 July deadline for airlines to refit planes with new sensors to address possible 5G interference; the estimated cost to upgrade planes is put at US$ 638 million. The Federal Aviation Administration and aviation companies have previously raised concerns that C-Band spectrum 5G wireless could interfere with aircraft altimeters, which measure a plane’s height above the ground. Even though they have been warned that they will be unable to meet the deadline and may be forced to ground some planes, Transport Secretary Pete Buttigieg has confirmed that the 01 July deadline would remain in place and advised them to work aggressively to retrofit their planes before the deadline. Telecom firms, including Verizon and AT&T, agreed last year to delay the rollout of 5G technology until 01 July 2023 to allow airlines time to retrofit their altimeters. IATA has also indicated that the decision not to extend the deadline makes summer disruptions more likely. The UK’s Civil Aviation Authority noted that “there have been no confirmed instances where 5G interference has resulted in aircraft system malfunction or unexpected behaviour”.

Still being hampered by ongoing supply chain issues, resulting in declines in deliveries, Airbus posted a 63.9% slump in Q1 profit to US$ 516 million, on the year. The European plane maker saw its revenue dip 2.0% to US$ 13.1 billion, as it delivered one hundred and twenty-seven planes – 106 A320s, ten A220s, six A330s and five A350s. It will have to ramp up production if it wants to meet its 2023 delivery target of seven hundred and twenty. The company, which is still the world’s biggest plane maker, posted a 38.0% decline in gross commercial orders at 156, with a 7.0k order backlog. In January, it posted that it planned to hire 13k new workers.

In India, budget airline Go First, owned by conglomerate Wadia Group, has filed for bankruptcy and cancelled all of its flights for the next three days after filing for bankruptcy protection but confirmed that “a full refund will be issued” to all affected passengers. It appears that the carrier is blaming its US engine maker, as it “had to take this step due to the ever-increasing number of failing engines supplied by Pratt & Whitney,” which in turn has led to a major cash flow problem. Go First said that because of the problem. it was forced to ground twenty-five aircraft – about half of its fleet of Airbus A320neo planes. It also claimed that the US supplier had not followed an order by an emergency arbitrator, which included supplying “at least ten serviceable spare leased engines by 27 April 2023”. (Industry experts have indicated that Go First is not the only local airline affected by engine and aircraft supply chain issues, noting that over a hundred commercial aircraft are grounded in India, including sixty planes of Go First and rival Indigo that are grounded due to a lack of spare parts.

After fifteen years at the helm of Qantas, Ireland’s Alan Joyce is to step down as CEO to be replaced by the carrier’s current CFO, Vanessa Hudson, who has been with the airline since 1994. It would be no exaggeration to say that Joyce had some turbulent periods during his time at the top including record oil prices, the GGFC, record losses following Covid, a 2021 court ruling that Qantas had acted illegally outsourced 1.7k ground staff sever consumer criticism last year over cancelled flights, lost luggage and many delays. The new incumbent has promised to work “very hard” to restore the Aussie carrier to its former glory.

International Consolidated Airlines Group, the parent company of several airlines, including BA, Aer Lingus, Iberia, Level and Vueling, posted its first-ever quarterly profit, since the onset of the pandemic; in Q1, it posted a US$ 10 million profit, as revenue leapfrogged over 71%, on the year, to US$ 5.2 billion. Although fuel prices spiked 35% in the quarter, fares were only 10% higher. With its portfolio of carriers, IAG has also recovered capacity to almost pre-Covid levels.

Despite an obvious industry slowdown, Apple beat Wall Street estimates, posting a marginal 2.5% dip in US$ 94.8 billion, which included a 1.5% rise in Apple’s iPhone revenue despite estimates that the industry experienced a 13.0% slump in Q1 global smartphone shipments; it is reported that the broader consumer electronics industry is struggling, as sales of smartphones, tablets and PCs have declined, attributable to consumers and businesses starting to cut costs as they tighten spending in an era of  rising interest rates and  economic turbulence. Apple now has 975 million subscribers on its platform, which includes both Apple services and third-party apps, 4.3% higher on the quarter and 18.2% higher on the year.

The same week that Arm became the latest UK tech firm to decide to list in New York rather than in London, the Financial Conduct Authority has announced plans to shake up its rules in a bid to attract more companies to list their shares locally by simplifying regulations and making the UK “more competitive” with stock markets abroad. The FCA’s proposals include replacing two listing categories with one single one and removing the requirement for shareholders to have a vote on transactions such as acquisitions. The plans would also allow founders to hold onto controlling shares for longer. The FCA said it wanted to make the rules that companies must follow to be allowed to list their shares in the UK, “more effective, easier to understand and more competitive”. What is certain is that although London remains Europe’s biggest financial hub, listings have dropped by over 40% over the past fifteen years. Many critics opine that the New York stock exchange is “much deeper” than London’s while Brexit had harmed the UK’s image as a place to do business.

Following the government-enforced Credit Suisse merger with larger rival UBS amid fears it could collapse, it was reported that bonds, valued at US$ 17.0 billion, became worthless. This week, it seems that Asian investors have joined a series of landmark international lawsuits being filed against the Swiss government. The bank had issued several types of bonds, including AT1 bonds, also known as contingent convertibles, to raise finance. Such paper normally carries high yields but as every Economics 101 student knows, the higher the return, the greater the risk and AT1 bonds were no exception when they were written down to zero, having been wiped out in a so-called “Viability Event”.  At the time, Finma, the Swiss regulator, confirmed that “the contractual conditions” for a write down were met. However, it seems that thousands of investors are arguing about how the terms of the merger were conducted, and that bondholders are, if possible, supposed to be compensated first, after which come shareholders. In this case, it seems that shareholders were allowed to exchange their Credit Suisse shares for UBS shares, before the bondholders; although the shareholders received almost nothing, they did receive a pay-out whereas the bondholders were left with zero. Episodes like this have seen the reputation of Swiss banks in tatters.

Morgan Stanley is planning a further redundancy package involving 3k jobs, (equating to 5.0% of staff excluding financial advisers and personnel supporting them within the wealth management division). This comes just months after the bank trimmed 2% of its payroll, currently standing at 82k.The bank is battening down its hatches to cut expenses ahead of a probable recession, which would impact both its top and bottom lines. Last month, chief executive, James Gorman, noted that underwriting and merger activity had been subdued and a rebound before H2 or even 2024 was not expected. Driven by a combination of a 22% slump in its equity-underwriting business, a marked slowing in deal making and a 32% fall in merger advisory, Morgan Stanley’s profit fell from a year earlier.

Banks and energy companies are seen to be making rude profits at a time when most companies, (and individuals), are struggling with double digit inflation and rising mortgage rates. HSBC more than tripled its Q1 profit, on the year, to US$ 12.9 billion. The profit figure was boosted by a US$ 2.1 billion reversal of an impairment, relating to the planned sale of HSBC’s retail banking operations in France, net interest income increasing by 38% to nearly US$ 9 billion, and a provisional gain of US$ 1.5 billion on the acquisition of Silicon Valley Bank UK in March, after the collapse of the parent’s lender in the US. Revenue increased by 64% to US$ 20.2 billion, driven by higher net interest income in all of HSBC’s businesses because of interest rate rises. There were significant improvements in both customer lending – US$ 40.0 billion higher in Q1 – and customer accounts by US$ 34 billion. A first interim dividend of US$ 0.10 per share was approved, as were plans to carry out up to a US$ 2 billion share buyback. The bank’s share price was up 4.0% on the day and 13.0% YTD.

As investors continue to be concerned about the state of the global economy, the current banking crisis, and the collapse of First Republic, shares in several US regional banks have dropped sharply. This was the third banking collapse in the country since March. The banking sector has also had to adjust from a period of zero rates to almost 5.0%, in just over a year, that is having a major impact on the US economy, which could damage banks, as both spending and confidence for businesses and households head south. The rise in interest rates could also damage some banks more than others, as higher rates hurt the market value of some debts, issued when borrowing costs were lower. There is no doubt that the US banking system – which has more than 4k banks – could be heading for a turbulent six months, with several facing bankruptcy and others being taken over in a wave of consolidations in the industry, as the economy weakens.

The US is in the midst of a banking crisis of confidence as Investors appear to be moving their funds from the country’s smaller banks to larger financial institutions and jumping ship following the most serious string of banking failures to hit the US since the 2008 GFC.  The Silicon Valley Bank failure in March was the catalyst that resulted in shares in regional banks being battered, with the likes of California-based PacWest plunging 50%, while Western Alliance also tumbled nearly 40%. The next two banks to collapse were Signature Bank, followed a few days later by First Republic this week. These failures were the biggest in US history, except for the 2008 collapse of Washington Mutual. The US Treasury Department continues to steady the ship, confirming it was monitoring developments “closely”.

With certain financial institutions and investors making obscene amounts of money on the back of “falling” financial institutions, there is no surprise to find out that US authorities are now looking into whether big investment firms are targeting, or attacking, otherwise healthy banks to make a profit. There is no doubt that there has to be “market manipulation” behind recent volatility in banking shares, and it cannot be a coincidence that a wave of “short selling” is a prime reason in a mega slump in the share price of several US banks. Belatedly, the White House says it is closely monitoring the situation and has reiterated its intention to monitor “short-selling pressures on healthy banks”. Consumer Bankers Association president and chief executive, Lindsey Johnson, has urged policymakers to call out “unethical behaviour by activist investors” who were taking advantage of market volatility.

Despite all the turbulence in its banking sector, and the ongoing impact of rising interest rates, there was continued robust job creation in the US last month. The unemployment rate dipped to a multi-decade low, at 3.4%, with a further 253k jobs added in April. In today’s report, the Labour Department noted that hiring had been weaker, than previously estimated in the previous two months, but undoubtedly the labour market has stood up well in an environment where benchmark rates have risen from zero to over 5.0% in just over a twelve-month period, as wages came in 4.4% higher. Although the Fed’s head, Jerome Powell, has commented that the US could avoid a downturn, that would throw millions of people out of work., the majority of analysts see the country falling into recession by the end of this year.

At a White House meeting this week, tech bosses, including Google’s Sundar Pichai, Microsoft’s Satya Nadella, and OpenAI’s Sam Altmann were told they had a “moral” duty to safeguard society, and that they have to control the possible damaging impacts from Artificial Intelligence. Over the past few months, there have been many industry leaders who have been calling for improved regulation, whilst earlier in the week, the “godfather” of AI, Geoffrey Hinton, quit his job at Google highlighting his regret of his work, and noting that some of the dangers of AI chatbots were “quite scary”. Earlier in the year, a letter signed by Elon Musk and Apple founder Steve Wozniak, called for a pause to the rollout of the technology. US Vice President Kamala Harris said the new technology could pose a risk to safety, privacy and civil rights, although it also had the potential to improve lives, but that the private sector had “an ethical, moral, and legal responsibility to ensure the safety and security of their products”. There are others, like Bill Gates, who have hit back against calls for an AI “pause” saying such a move would not “solve the challenges” ahead, with some against over-regulation, that could see China take advantage and move well ahead in this field.

During its five-day national May Day holidays, China’s Ministry of Tourism confirmed that tourists made 274 million trips within the country, as its domestic tourism rebounded with latest figures over 20% higher than recorded 2019 pre-Covid figures. Official figures also show that tourists spent US$ 21 billion during the period – also higher than pre-Covid figures. Interestingly, an average of 1.2m Chinese people travelled abroad each day, which was twice last year’s figure, but airline bookings by Chinese tourists travelling abroad were still around half what they were before the pandemic.

According to Eurostat figures, 75% of the EU’s 20–64-year-old are in employment – equating to 193.5 million, the highest number since records started in 2009. Because of Covid, the percentage had dropped to 72% in 2020, with a 2% rebound a year later. Of that total, eleven nations had rates over 78%, including the leading three – Netherlands, Sweden and Estonia, 83%, 82% and 82%. The lowest rates were seen in Italy (65%), Greece (66%), and Romania (69%). Over-qualification, (the percentage of employed with a tertiary education working in a situation that does not require such a high level), seems to be an ongoing problem, with rates of 23% for women and 21% for men. By country, the five lowest returns were seen in Luxembourg (7%), Sweden, Denmark, Hungary, and Czechia (each 14%); at the other end of the scale were Spain (36%), followed by Greece and Cyprus (each 32%).

 In line with most leading global banks, and with the aim of getting on top of rampant inflation, the ECB raised its key interest rate by 0.25% to 3.25%; the twenty-country bloc has seen rates raise by 375bp since July 2022. The ECB, probably the last central bank to start raising rates, commented that “the inflation outlook continues to be too high for too long,” One of the main factors considered by the bank was data indicating the biggest drop in loan demand in over a decade, and a possible sign that previous rate rises have impacted and that policies are indeed restricting growth – nevertheless, consumer prices rose last month, after five consecutive months of decline, nudged 10bp higher to 7.0%.

Meanwhile, preliminary flash figures indicate that, in Q1, the seasonally adjusted GDP increased by 0.1% in the euro area and by 0.3% in the EU, compared to Q4, when GDP had remained stable in the euro area and had decreased by 0.1% in the EU; a year earlier, the seasonally adjusted GDP had jumped 1.3% in both the euro area and the EU. The four nations, with the highest quarter on quarter increase in Q1, were Portugal (1.6%), followed by Spain, Italy and Latvia, all with 0.5% rises. Declines were recorded in Ireland (-2.7%) and Austria (-0.3%) but on a year-to-year basis only Germany posted negative growth at minus 0.1%.

Latest March figures from Rightmove indicate that average monthly London rents now top (US$ 3.12k), and outside the capital US$ 1.37k, mainly attributable to a dearth of property available. Interestingly, the number of rental properties available is 8% higher on the year but still almost half the pre-Covid figure, not helped by no significant influx of new properties becoming available to rent. It also noted that the asking rental price for new tenants, outside London, has risen again for the thirteenth consecutive quarter.

A surprise saw UK April house prices up by 0.5% in April, (to US$ 325k), after seven consecutive months of falls, according to the Nationwide Building Society – when analysts were forecasting an eighth decline. Prices are still 2.7% lower than a year ago, with mortgage rates double the figure compared to April 2022. Nationwide is predicting a “modest recovery” in the housing market, with any improvement being “fairly pedestrian”, as mortgage rates start to come down.

The British Retail Consortium is more confident than most to forecast that the cost of wholesale food prices will start to fall after new data shows that the April cost of wholesale food prices were 15.7% higher on the year, with NielsenIQ shop price index, showing that fresh food prices had accelerated to 17.8%. With both labour costs and energy prices moving higher, it seems unlikely that widespread price falls will be slow to filter down to the supermarket shoppers. While overall food prices continued to rise in April, inflation, which is the rate at which prices rise, both food and non-food, fell marginally to 8.8% last month. However, it must be noted that the World Bank has come out, saying it expects them to drop 8% by the end of this year, and that the BRC has indicated there is a three- to nine-month lag to see a decrease in wholesale prices reflected in-store.

Banks have also warned of a large increase in fraud last year, with the focus originating online, which Barclays saying that it accounts for 77% of total scams are now happening on social media, online marketplaces and dating apps. TSB has seen a large increase in cases of impersonation, (tripling on Facebook), investment and purchase fraud – doubling on the same platform. The depth of the problem is echoed by the likes of Meta noting that fraud is “an industry-wide issue”, a spokesman of Lloyds Banking commenting that banks are facing an “epidemic of scams” and NatWest noting that three million people in the UK were victims of fraud in 2022. Whilst acknowledging the problem is getting worse, some banks appear to be putting increased pressure on the various platforms to clean up their platform to protect consumers, with Paul Davis, TSB’s director of fraud prevention, saying “it’s high time that social media and telephone companies took financial liability for the rising levels of fraud taking place on their platforms.”

Staggering figures in the UK – which could well be replicated in other countries – sees fraud becoming the most common crime in the country, with one in fifteen people falling victim. The government is taking action and is set to ban calls selling financial products as part of a national crackdown on scams; it is hoped that such action could stop fraudsters selling sham insurance products or cryptocurrency schemes. According to media watchdog, Ofcom, forty-one million people were targeted by suspicious calls and texts in 2022. It will also establish a new five hundred-staff fraud squad to control and monitor fraudulent activity, with data showing that most fraud now has an online element. The government is hoping that “anyone who receives a call trying to sell them products such as cryptocurrency schemes or insurance will know it’s a scam”. Furthermore, the government said:

  • so-called “Sim Farms”, where people use a large number of Sim cards to send text messages in bulk, will be banned
  • intelligence services and police will work with overseas partners to shut down call centres engaged in fraud
  • advertising campaigns will warn people about the risk of scam calls
  • there will be new measures to tackle phone number “spoofing”, where scammers alter Caller ID information to make calls look genuine.

The Centre for Retail Research estimates that this weekend’s coronation celebrations could add more than US$ 1.75 billion to the UK economy, with more than US$ 265 million being spent on food and drink, and US$ 310 million on Coronation coins, tokens and medallions, celebratory teapots, mugs, cups and other crockery. Furthermore, extended pub opening hours are expected to add a further US$ 130 million to the hospitality sector.  Additional foreign tourists could bring in as much as US$ 405 million, with much of it spent on accommodation, restaurants and shopping in London. Supermarkets are cashing in, with Tesco forecasting that they will sell 675k pork pies, 600k scones and 300k pots of clotted cream, with Aldi selling quiches, the King’s chosen Coronation dish, at the rate of more than thirty every minute and reporting expected scone sales to be 150% higher. On the alcohol side, Tesco anticipate sales of 180k bottles of Pimms and Asda beer sales are expected to be 25% higher. Even if the Coronation were to add a little to the GDP, it would be short-sighted to think that Saturday will change the economy. Sunday will not only see many hang-overs but also the economy quickly returning to reality – high inflation, on-going strikes, a weak government and high mortgage rates. Sunday Morning Coming Down!

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