Author Archives: Fish Saltus

FTSE falls despite dollar recovery from Trump sell-off

The FTSE 100 has closed down, despite the pressure from a stronger pound easing as a dollar sell-off sparked by US president Donald Trump calmed.

The UK blue-chip index closed 21 points, or 0.3%, at 7,328, despite the pound ending the day down against the dollar, which recovered from a slump sparked by Trump’s comments the greenback was ‘too strong’.

But it’s still been a strong week for the pound, currently changing hands at $1.252, up from $1.237 earlier in the week. A stronger pound tends to hamper the FTSE 100, whose members rely on overseas markets for around three-quarters of their revenues.

Trump said in an interview with the Wall Street Journal the dollar was ‘getting too strong’ and that he would prefer the US Federal Reserve keep interest rates low.

‘I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me,’ he said. ‘But that’s hurting – that will hurt ultimately. It’s very, very hard to compete when you have a strong dollar and other countries are devaluing their currency.’

But in a marked shift, Trump refused to label China a currency manipulator, having made that claim on the campaign trail, saying it could jeopardise talks with the country over tackling North Korea.

Analysts at Rabobank said the market’s response to Trump’s election, rallying on prospects of higher growth and inflation, had left the president in a difficult position.

‘The Fed’s March rate hike and discussion as regards further normalisation of policy (including the unwinding of the Fed’s balance sheet) will serve to underpin the view that the economy is indeed on the mend, placing additional pressure on dollar strength,’ they said.

‘The difficulty for Trump on this front is that this all clearly runs counter to a weaker currency and offers him little room for accusing trade partners (particularly those in regions that are maintaining soft monetary policies of their own) that they are actively manipulating their currencies with a view to damaging the US economy for their own financial gain.’

Royal Mail to close DB pension scheme

Royal Mail will close its defined benefit (DB) pension scheme next year after consulting with members about its future. The scheme has 90,000 members and is currently in surplus, according to the BBC.

However, Royal Mail said the scheme’s surplus will run out next year. As a result, the scheme will close to new accruals in March 2018. It closed to new members in 2008.

Royal Mail currently contributes £400 million a year to the DB scheme but this will have to increase to £1 billion next year, the company said.

‘We have concluded that there is no affordable solution to keeping the plan open in its current form,’ Royal Mail said.

‘Therefore, the company has come to the decision that the plan will close to future accrual on 31 March 2018, subject to trustee approval.’

The Communication Worker Union (CWU) condemned the closure and threatened strike action as a result of Royal Mail’s decision.

Ray Ellis, acting deputy general secretary (postal) at the CWU, said the union would take action on what it sees as a decision that goes back on promises made when Royal Mail was privatised in 2012.

‘CWU has made clear that any attempt by the company to impose change without agreement will be met with the strongest possible opposition including a ballot for industrial action,’ he said.

Pensions minister: lifetime allowance is more than enough to retire on

The £1 million lifetime allowance (LTA) allows people to save four times what they need to reach an average retirement income, according to pensions minister Richard Harrington.

Since 2011 the LTA has fallen from £1.8 million to its current level of £1 million.

People who breach the £1 million limit over a lifetime face penalties of up to 55% when they receive their pension.

The policy, which collected HM Revenue & Customs (HMRC) £126 million for the 2015/16 tax tear according to a Financial Times report, has attracted criticism from many. Former pensions minister Ros Altmann is among those who have called for it to be scrapped.

However current pensions minister Harrington (pictured) has defended the LTA. He said the policy is part of the difficult choices the Treasury has to make.

‘At the end of the day the Treasury has got its own pressures,’ he told New Model Adviser®. ‘But what I would say is although the pot is only £1 million, that doesn’t mean you can only save £1 million, it just means that taxpayers won’t help you beyond that and governments have to make that kind of choice with everything.

 

 

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Housing market stagnating, say surveyors

Property surveyors are getting gloomier about the state of the housing market, according to the Royal Institution of Chartered Surveyors (Rics).

Its latest monthly survey shows that stock levels are at a new record low.

The number of people interested in buying a property – and the number of sales – were also “stagnant” in March, it said.

However, because of the shortage of housing, it said prices in many parts of the UK are continuing to accelerate.

While prices carry on falling in central London, Rics said that price rises in the North West were “particularly strong”.
Most surveyors across the country still expect prices to rise over the next 12 months, but by a smaller majority than in February.

But on average, each estate agent has just 43 properties for sale on its books, the lowest number recorded since the methodology began in 1994.

“High-end sale properties in central London remain under pressure, while the wider residential market continues to be underpinned by a lack of stock,” said Simon Rubinsohn, Rics chief economist.

“For the time being, it is hard to see any major impetus for change in the market, something also being reflected in the flat trend in transaction levels