Vaulting as high as $2.06, sterling resumes its six month rally versus the greenback, lying atop a perch not seen since May 1981. Trading at $2.0586 in the afternoon Wall Street session, traders shook off disappointing UK housing data and bid up the cable on broad dollar weakness and upbeat GDP readings.
[B][U]UK Headlines:[/U][/B]
[B][I]UK House Prices Increase at Slowest Pace This Year[/I][/B]
U.K. house prices rose in July at the slowest pace this year as rising interest rates sapped demand outside of London, where home values surged. The average asking price in England and Wales gained 0.3 percent to 240,001 pounds ($493,000) from a month earlier, Rightmove Plc, the U.K.'s biggest real-estate Web site, said in a statement today. That was the smallest increase since prices fell in December. Home values in London rose 1.8 percent, more than double June’s pace.
-Source: Bloomberg
[B][I]Water Levels Reaching 60-year Highs
[/I][/B]Flood waters in parts of England rose to 60-year highs on Monday, submerging huge swathes of land and leaving thousands of people without running water or electricity.
The Environment Agency issued nine severe flood warnings with large parts of Worcestershire, Gloucestershire and Warwickshire under water after torrential rainfall and river levels in some areas still rising.
-Source: Reuters UK
[B][I]Barclays Enlists Asian Aid to Raise ABN Offer[/I][/B]
Barclays on Monday increased its offer for ABN Amro to €67.5bn and introduced a cash element by agreeing to sell shares worth €13.4bn (£9bn) to China Development Bank and Temasek Holdings, the investment group owned by the government of Singapore. Barclays has also signed a strategic partnership arrangement with CDB, a bank with which the UK group has long had a relationship
-Source: Financial Times
[B][U]UK Market Activity:[/U][/B]
[I][U]Currency Markets:[/U][/I] [B]GBP
[/B]Vaulting as high as $2.06, sterling resumes its six month rally versus the greenback, lying atop a perch not seen since May 1981. Trading at $2.0586 in the afternoon Wall Street session, traders shook off disappointing UK housing data and bid up the cable on broad dollar weakness and upbeat GDP readings. Boasting the highest lending rates in the G7, expanding differentials continue to underpin the British currency?s accent as carry-trade inflows support the pound?s lofty position. Interest-rate futures indicate that investors are fully pricing in a BoE move to 6.25 by years end with the implied yield on the December contract up 11 basis points since the end of May.
[I][U]Equity Markets:[/U][/I] [B]FTSE 100[/B]
Top London equities ticked higher this session paced by shares in Barclays Plc and Friends Provident. Contributing 3.01 percent to the benchmark FTSE 100, Barclays closed at 735.00 on news that the bank enhanced its offer for ABN Amro Holding. In what could result in the largest banking takeover, Barclays secured funds from the governments of China and Singapore to sweeten the now 67.5 billion (EUR) bid for the Dutch bank. However, Barclays was not the session?s biggest winner. Friends Provident emerged, catapulting 8.1 percent to 201.00 on heavy volume as the 175-year-old British insurer posted its biggest gain in two months.
[I][U]Fixed-Income Markets:[/U][/I] [B]10-Year Long Gilt
[/B]Lingering credit market apprehension continues to characterize fixed income trading. Sliding as low as 5.27 percent, the yield on the benchmark 10-year gilt fell 2 basis points to trade at 5.29 percent as investors favor the relative safety of long government issues. Gilts yielded a 4 basis point premium to that of equivalent Treasuries in January. Compared to a current 33 basis point spread, British assets will continue to become increasingly more attractive as the disparity expands.
