18 Oct 2018
JLL index shows continued growth in capital values
The latest (Q318) Irish Property Index release from JLL shows continued upward pressure on Irish commercial property values. The overall index was +1.4% q/q in Q3, split between capital growth of 0.22% and income growth of 3.56%. In the quarter, Retail capital values rose 35bps, followed by Office (+12bps), while Industrial was surprisingly flat.
On an annual basis, the overall index was +7.61%, the slowest y/y pace of growth since Q213, split between capital growth of 2.55% and income appreciation of 10.08%. Retail, Industrial and Office capital values all increased by roughly the same amount (2.96%, 2.41% and 2.24%) on an annual basis, while there was decent growth (2.54%-6.50%) in ERVs across the board.
Positive tone, but no progress at EU summit
Last night Theresa May delivered a short update on the UK’s views on Brexit to a EU27 working dinner. Here the overall tone between PM May and the EU’s Leaders was more positive than at the Salzburg summit a month ago. Despite the more constructive air in the PM’s address there was little in terms of new proposals from the PM, the only point of note being the fact that the PM stated that she was ready to consider an extension of the transition period, opening up the possibility of this lasting until the end of 2021. Over the working dinner (which PM May did not attend) the EU judged that there had been insufficient progress on the withdrawal treaty and the backstop for the EU to sanction an extraordinary summit in November, Michel Barnier himself stating that more time was needed than just a few weeks to break the deadlock. Given the EU decision over a November summit, the timeframe for agreeing a deal now looks to be heading towards the EU Council summit on the 13 December, although we would note that there is the possibility that the timetable slips further and that a final agreement is not reached until January.
Minutes to the 25-26 September FOMC were published last night. In short, they served to maintain the spotlight on the pace and extent of US interest rate hikes going forward. They showed discussion over how much additional policy firming would be needed to maintain the Fed’s objectives. Here “a few” participants expected that policy would become modestly restrictive for a time and judged it would be necessary to “temporarily raise the federal funds rate above their assessments of its longer-run level”. However at the other end of the scale “a couple” were against a restrictive policy stance. The tone of the minutes is in keeping with the statement as one would expect, with an upbeat assessment of the economic outlook. However the focus is still on “its gradual approach to policy firming”. In markets, the dollar strengthened following the publication of the minutes and 10-year Treasury yields rose to 3.20%. There was a limited reaction in US equities, with the S&P 500 closing flat.
China avoids currency manipulator tag, just
The US Department of Treasury delivered their latest semi-annual report on Foreign Exchange policies of Major Trading partners to Congress yesterday. The report was widely anticipated by markets on the expectation that the report could brand China as a currency manipulator, which would add further pressure on the already deteriorating relations between the two nations. While China avoided being labelled as a currency manipulator, they were singled out for individual analysis by the Treasury department. The report noted the lack of transparency in their currency intervention, a move away from economic liberalization towards reinforcing state control, and increased reliance on non-market mechanisms were all highlighted as areas of concern by the Treasury.
China was joined by Japan, Korea, India, Switzerland and Germany as countries whose currency practices required “close attention”, although in Germany’s case, the report acknowledged that “the ECB have not intervened unilaterally in foreign currency markets in over 15 years”.
09.30 UK Retail sales
14.30 EC EU Leaders Summit