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Good afternoon from London. Heres essential reading for the City on todays Brexit developments from WSJ City. For updates throughout the day, you can download WSJ City foriPhone hereorAndroid here. Youll need to open this email on your mobile device to do this. And you can sign up to receive this briefingdirect to your inbox here.
MUST READS FROM WSJ CITY
UK government bond traders might want to postpone their August holidays. Gilts have become the most actively traded bonds in Europe since the Brexit vote, in another sign of how the UK has become the main driving force in global bond markets in recent weeks. The average daily trading volume of the UK 10-year government bond is 6.75 billion so far in August roughly seven times higher than it was during the first three months of year, according to Trax.
UK banks have dramatically reduced their exposure to Britains commercial property market in the past 5 1/2 years but are still at risk from a downturn in the sector, according to a report from Moodys. The six largest UK banks have reduced their aggregate exposure to the sector by around 40% since the end of 2010 to 84.6 billion, according to the rating agency. Moodys projects a 10% decline in UK commercial property values but warned a severe stress scenario could lead to losses of up to 12 billion.
British universities are finding themselves in a new, uncertain world. Some of the countrys top academicswhose grant writing today will fund projects years into the futureare stepping aside from leading EU-funded projects. In others, they say, they are being asked to reconsider participating altogether in projects competing for such funds. The changes are putting at risk some of the money that has helped them maintain their research clout.
Global investors were less bearish in August, reducing their cash holdings and moving into stocks amid hopes for a rebound in economic growth and a prolonged period of easy money, according to Bank of America Merrill Lynchs latest fund manager survey. However, the UK remains the most under-weighted region globally, although investors boosted their exposure slightly in August, BAML said.
The good news: lower immigration to the UK should boost pay in some low-paid jobs. The bad news: The effect will be limited to a few types of jobs and some specific parts of the country. The worse news: Across-the-board weakening of wages as the economy slows will more than wipe out the values from reduced immigration anyway. Thats the maths in a study by Resolution Foundation, a non-partisan think tank that looks at living standards in low- and mid-pay Britain.
Prime minister Theresa May has sought to reassure the Chinese leadership that London is committed to strengthening relations with Beijing following the Brexit vote. In a letter, May said she was looking to strengthen cooperation with China on economic, trade and global issues, Chinas foreign ministry said in a statement. The UKs relationship with China has been strained since itlast month postponed the go-ahead for an 18 billion nuclear power project that China had agreed to part-fund.
IN THE PAPERS
Inflation Heads Towards Two-Year High- The Times
Weak-Pound Adrenaline Drives FTSE 100 Towards Fresh Record High- WSJ
Low Paid Told Not to Expect Post-Brexit Boost in Wages- The Times
The Curious Incident of Volatility In Three Months Time- WSJ
MARKETS TODAY
Stocks around the world edged back from highs on Tuesday and government bonds and the dollar retreated, following fresh indications that the US Federal Reserve could raise interest rates this year.
Londons FTSE 100 ended the day down 0.5%, mirroring similar moves across Europe and the US.
Data released on Tuesday showed US consumer prices were flat in July, a signal that inflation remains modest. Stocks sensitive to changes in interest rates, such as utilities and phone companies, were among the biggest fallers on Wall Street.
On the FTSE 100, Marks & Spencer was the biggest laggard, ending the day around 3% lower.
In currency markets, the pound clung onto steep gains against the dollar for most of the session. Sterling rose early in the day after data showed UK inflation rose in July, with the CPI figure climbing 0.6% on the year, compared with a rise of 0.5% in the year to June.
Oil prices extended a three-day rally, spurred by hopes that major producers will consider a production freeze at a meeting next month.
Source: http://blogs.wsj.com/moneybeat/2016/08/16/wsj-citys-brexit-briefing-gilt-trading-soars-banks-slash-property-exposure-universities-face-brexit-uncertainty/
