Headlines: UK News

Breaching the psychologically significant 2.0000 level for a third day this week, the pound matched a high seen last on May 1st on the back of a robust U.K. housing picture and MPC testimony.


[B][U]UK Headlines:[/U][/B]
Advancing this month at the fastest pace since December, U.K. housing prices rose 1.1 percent in May beating economists? expectations for the dwelling data.

Leading the FTSE 100 Index were the miners BHP Billiton and Rio Tinto as workers at Codelco mines in Chile strike put future copper supplies to question.

  • [I]“Copper Gains in New York on Concern Strikes Will Curb Supplies”[/I]
    Bloomberg - Are you a robot?
    [I]-Source: Bloomberg[/I]
    [B][U]UK Market Activity:[/U][/B]
    [I][U]Currency Markets:[/U][/I] [B]GBP/USD[/B]
    Breaching the psychologically significant 2.0000 level for a third day this week, the pound matched a high seen last on May 1st on the back of a robust U.K. housing picture and MPC testimony. BoE Governor Mervyn King expressed the importance of “maintaining vigilance against inflation” to the Treasury Select Committee overnight solidifying his hawkish stance that it?s “better to take action sooner then later”. The cable climbed as high as 2.0043 on the news implicating imminent BoE tightening to quell inflation. Defying calls for higher borrowing costs, nationwide house prices advanced 1.1 percent from May, bolstering the case for a six-year high 5.75 benchmark to cool the bubbling U.K. housing market.

[U][I]Equity Markets:[/I][/U] [B]FTSE 100[/B]
London equities halted their sustained retreat and joined the global stock rally with BHP Billiton (BLT.L) and Royal Dutch Shell (RDSa.L) leading the way. Cumulatively; the mining and oil components of the benchmark FTSE 100 contributed 26 points to the index (+0.6 percent, to 6569.1) as the future supply picture in base metals and oil contract. Crude climbed 1.61% to 70.080 ($/barrel) sending the recently upgraded Royal Dutch Shell (RDSa.L) +2.32 percent to 2002.50 pence. The world?s largest mining firm BHP Billiton (BLT.L) rose 2.97 percent, closing the session at 1385.00 pence. A strike in Chile boosted the COMEX copper contract for September delivery 2.56 percent to 343.900 (cents/lb) as traders consider the strikes impact on global supply.


[U][I]Fixed-Income Markets:[/I][/U] [B]10-year Long Gilt[/B]
Amidst a global equity rally, bonds were sold off as investors shake off the Bear Sterns fiasco sending yields to the upside. Additional hawkish rhetoric out of the MPC testimony certainly weighed on the U.K. 10-year gilt as yields near their highs +2bp to 5.429 percent. Adding validity to Governor King?s tightening campaign was the spike in housing prices as implied yields on the December interest-rates futures convey increased wagers on higher borrowing costs (+2bp to 6.24).