The value of investments and any income from them can fall and you may get back less than you invested.

Inflation hits highest level in six years

The likelihood of a no-deal Brexit seemed to increase on Thursday after the EU rejected Theresa May’s “Chequers” proposal for an orderly UK withdrawal. However, Donald Tusk, the chief of the European Council, said simply that the plans would not work. The rebuttal means time is running out to find a mutually acceptable compromise.

There was conflicting data released on the UK housing market this week. Property group Rightmove reported on Monday that house prices rose by 0.7% in September, rebounding from a 2.3% drop in August. That translates to an annual increase of 1.2%, while prices in London were also up by 1.2% month-on-month. London has been suffering over the past two years with relatively steady price declines, but Rightmove said that those price falls had let to better affordability and a consequent pickup in demand in the capital. However, data released on Wednesday by the Office for National Statistics (ONS), showed average house prices in London had fallen by 0.7% in the year to July, while the national average house price had risen by 3.1% in the year to July, down from an annualised rate of 3.2% in June. Monthly data is volatile, and broadly speaking the UK market appears to be slowing with London falling faster than any other area. There are pockets of strong growth, however, with the north west booming relative to other areas. Prospects for London are remain relatively downbeat, as it is likely to be more affected by interest rate rises and falling migration from the EU than any other area.

Donald Trump imposed a 10% tariff on a further $200billion of Chinese goods on Monday night, and will increase that rate to 25% from January. If China retaliates, the US president said he would impose tariffs on another $267billion of Chinese goods in a rapidly escalating trade war. Nevertheless, Beijing responded immediately with tariffs on $60billion of US goods. Hopes of a resolution are pinned on negotiations that are due to take place sometime before January.

The annual rate of inflation jumped to its highest level in six years in August. Consumer prices rose by 2.7% on an annualised basis, up from 2.5% in July, according to the ONS. Clothing, package holidays, toys and theatre tickets were among the highest-rising items. The increase suggests that inflation is closing in on wage price growth. Earnings including bonuses were reported as rising by 2.9% in July, although regular pay growth was just 2.6%, suggesting many people are seeing their income fall in real terms. However, retail sales increased by 0.3% in August, registering a surprising 0.3% rise in sales volumes, confounding many analysts who had predicted a fall. There was a 4.5% increase in sales of household goods while “non-food” sales were up by 2.8%. Food sales and clothing volumes fell, but not by enough to counter the strong growth in other areas.

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Important Notes:

Main source of information: Company Report and Accounts, Bloomberg

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