Recent Developments: Brexit, UK Trade Data And Housing Prices Update

Stocks in the London Market are trending higher with the broader equity benchmark index FTSE 100 extending gains on the first trading session of this week and adding 25.78 points or 0.35 per cent to 7,308.12. The reason behind the surge in today’s session were easing concerns over a no-deal kind of divorce from EU, and US Federal Reserve signalling further interest rate cuts. Other benchmark indices like FTSE 250 and FTSE All-Share added 22.8 points and added 18 points, respectively, as well (at the time of writing at 08: 58 AM GMT, before the market close).

During the first week of September 2019, the British parliamentarians voted in favour of a bill requiring Mr Johnson to seek an extension to the Brexit deadline scheduled on October 31, 2019, in case an agreement is not reached before October 19, 2019

Meanwhile, the British government is expected to ask parliamentarians to support a snap election ahead of House of Commons being suspended for five weeks. However, the chances of another defeat for the government are very high.

Despite a weaker prospect for a no-deal Brexit, the Sterling Pound was trading lower against the US dollars at 1.2240 (at the time of writing 09:20 AM GMT).

UK Trade Update- (May-July 2019)

The Office of National Statistics as on September 09, 2019, released trade update for July 2019 and key findings are:

  • The total UK’s trade deficit lowered by £9bn to £2.9bn during the three months ended to July 2019. This was largely driven by falling imports and narrowing trade gap.
  • During the three months under consideration, imports of goods slumped by £1bn to £119.5bn, along with imports of unspecified goods, chemicals and machinery and transport equipment which fell during the same period.
  • Imports of chemicals narrowed by £1bn in the three months ended to July 2019, primarily on account of the slump in medical and pharmaceuticals by £1.4bn while machinery and transport products imports were down by £1.7bn, driven by £1.6bn reduction in imports of road vehicles during the same period.
  • In the same period, trade in services surplus lowered to £4bn and services imports plunged by £1.1bn, which was counterbalanced by exports during the three months ended to July 2019.
  • Excluding unspecified goods and including non-monetary gold, the UK’s total trade deficit narrowed by £7bn to £4.7bn, while exports slumped by £2.5bn to £159bn and imports declined by £6.2bn to £163.8bn during the three months ended July 31, 2019.
  • After removing the inflationary effect, the UK’s total trade deficit decreased by £2bn to £1.4bn during the three months under consideration.
  • However, the total trade deficit, including goods and services expanded by £8bn to £43.2bn during the twelve-month period ended July 2019, primarily driven by an increasing goods deficit of £15.2bn to £149.8bn.

Imports from non-EU countries fell during the May-July 2019 period.

During the three months to July 2019, imports from non-EU countries declined by £8.2bn to £56.3bn, primarily on account of the decrease in imports of unspecified products of £8.9bn; however it was partially offset by a surge in imports of fuels, machinery and transport equipment of £0.6bn and £0.5bn respectively.

Exports to non-EU countries rise during the same period under consideration has risen by £2.6bn to £48.1bn, primarily on account of increase in exports of unspecified products and miscellaneous manufactures of £2.2bn and £0.8bn respectively.

Meanwhile, imports from EU member countries shed £5.9bn to £63.2bn during the three months ended to July 2019. Machinery and transport equipment import from EU bloc narrowed by £2.2bn mainly because of £1.5bn decline in the import of road vehicles. And, chemical imports reduced by £1.7bn on account of £1.2bn reduction in the medical and pharmaceuticals goods.

Exports to EU member countries declined by £1.8bn to £42.1bn in the three months ended to July 2019, driven by £0.8bn reduction in machinery and transport equipment, because of lowering of imports of the other transport equipment. 

High Court rebuffed a legal challenge to Prime Minister Johnson’s decision to suspend the British Parliament.

On August 28, 2019, the British prime minister announced shutting down of the British Parliament for five weeks ahead of Queen’s speech as on October 14, 2019. The opposition members argued that the Prime Minister wants to avoid parliamentary scrutiny. High Court rebuffed a legal challenge to Prime Minister Johnson’s decision to suspend the British Parliament.

However, as on September 06, 2019, the legal challenge over prime minister’s announcement was rebuffed in the High Court, rejecting Gina’s challenge. The Lord Chief Justice said that she could instantly appeal the decision at a higher court because of the complexity of the situation.

As on September 17, the appeal is expected to be heard at Supreme Court, meanwhile, Gina said that she is unhappy with the judgement.

Recently several insurgent Parliamentarians of the Conservative Party and opposition rebuffed the prime minister Johnson in the House of Commons in an attempt to stop Johnson from taking Britain out of the European Union without having any deal with the EU bloc. This made the British prime minister to announce an immediate snap election. Prime Minister Johnson was voted down by 328 to 301 votes on a motion put forward by insurgent MPs of prime minister’s party and opposition lawmakers. Now it’s been more than three years that the EU divorce vote took place (June 23, 2016).  This defeat left the Brexit mess unresolved, with higher probability for disorderly exit of the UK from the European Union.

UK’s House Prices rose slightly in August 2019- HALIFAX Report.

In the June to August 19 period, House prices in the UK improved marginally by 0.1% as compared with the decline of 0.5% reported during the May to July 2019 and on a Y-o-Y basis, it was ahead by 1.8% for August 18 to August 19 period as compared with 1.5% increase in price recorded in the July 18 to July 19 period, respectively.

It is largely regarded that housing prices will undoubtedly be influenced by the micro and macro events in the economy.  Recent data reported by Halifax as on 06 September 2019, and house prices increased by 0.3% on a month-on-month basis, and average price stood at £233,541. On a Q-o-Q basis, the UK’s house prices improved slightly by 0.1 per cent and it was improved by 1.8% on a YoY basis.

Halifax report also reveals that mortgage approval has increased slightly, as Bank of England (BOE) data exhibits that number of mortgages that got approval to fund house purchases were approximately 67,306 in July 2019, reflecting an increase of 1.2% against June 2019 and reached a record level since July 2017. (Source: BOE seasonally adjusted figures).

The report also revealed that the UK home sales are declining; in July 2019, 86,630 homes were sold. On a Y-o-Y basis, the UK seasonally adjusted residential transaction in July 2019 was around 12.4% lower than July 2018 and declined by 11% on a non-seasonally adjusted basis.