Gloomy data extends financial crisis

By Gideon Spanier, Simon Read

The eurozone crisis has hit confidence in the stock markets. Photo / AP
The eurozone crisis has hit confidence in the stock markets. Photo / AP

A raft of gloomy economic data will stoke fresh fears that the UK is facing a prolonged double-dip recession, as the eurozone crisis hits confidence in both the property and stock markets.

Private investors have been selling shares at their fastest rate in five years, pulling out a net £1 billion ($1.95 billion) in equities in the second quarter of the year, according to Capita Registrars.

Meanwhile, a national housing survey from Hometrack, published yesterday, shows that new buyer registrations fell for the first time in five months, with demand slipping 0.5 per cent.

Richard Donnell, director of research at Hometrack, warned that prices would fall in the second half of the year by 1.3 per cent.

"There's growing uncertainty over the economic outlook and the impact of the eurozone," he said.

The pessimism settling over the housing market was confirmed by a doubling in the number of postcode districts with price decreases over the month from 12.1 per cent to 23.4 per cent.

The worrying data will heap pressure on the Bank of England Governor, Sir Mervyn King to print more money through quantitative easing when the Monetary Policy Committee meets tomorrow.

There is speculation that the MPC could authorise a further £50 billion in QE, having already injected £325 billion to keep the economy afloat since 2009.

King has even hinted that interest rates could be cut from their present record lows of 0.5 per cent.

The fact that private shareholders have pulled out of equities since the start of the new financial year is worrying because there is traditionally a surge in savers investing in tax-free schemes such as ISAs.

Charles Cryer, chief executive of Capita Registrars, said: "Private investors have sold off more shares even than in the summer of 2008. The tone has certainly changed in recent months. The eurozone crisis has now reached another critical phase and hopes for the global economy have been dampened. Private investors have reacted by selling shares in large volumes."

A tough three months for equities saw the FTSE 100 index fall almost 200 points to end the April-June quarter at 5571, prompting talk of job cuts in the City when the big US banks report from next week.

The inter-dealer broker Icap axed 60 posts on Friday and Tullett Prebon has lost 140 jobs.

The City jobs market plays a key role in London property prices and Donnell warned that the new 7 per cent stamp duty rate on homes above £2 million could affect sales.

The Hometrack survey showed that the supply of homes for sale continues to rise and has outpaced the rise in demand for each of the last three months. The time it takes to sell a property also rose slightly, from 9.3 weeks to 9.4 weeks.

Mr Donnell said: "As we move into the summer months, the traditional seasonal slowdown will ensure that demand remains subdued, and the Olympics will only contribute further to this."

There was some optimism from Rightmove's Consumer Confidence Survey, also published yesterday, which showed that the number of first-time buyers expecting to buy in the next year is at its highest level for nearly three years.

- Independent

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