Morning Note: Market news and an update from housebuilder Berkeley Group.

Market News

Austan Goolsbee said the longer-run trend of jobs and inflation data justify the Fed cutting rates soon, and then steadily over the next year. The unemployment rate has been rising faster than officials had expected in June, he told MarketWatch. His comments come ahead of today’s US non-farm payrolls data – the estimate is 165k, and an unemployment rate of 4.2%. A worse-than-expected number could spur the central bank into making a jumbo 50 basis-point cut at its September meeting. 10-year Treasury yields 3.70%, while gold is $2,520 an ounce.

The ECB probably won’t accelerate easing in response to a weakening economy, a survey found. After an expected cut next week, respondents see quarterly reductions through September 2025 to 2.5%, where rates will remain through 2026.

US equities ended a mixed session last night with the S&P 500 down 0.3% and the Nasdaq up 0.3%. In Asia this morning, markets were generally lower. The Nikkei 225 continued its recent decline (-0.7%) as the yen strengthened towards 142 to the dollar. The Hang Seng was closed, while the Shanghai Composite fell 0.7%. Chinese banks have built a $100bn short against the US dollar using FX swaps to prop up the yuan.

The FTSE 100 is currently trading 0.5% lower at 8,203, while Sterling trades at $1.3181 and €1.1858. Brent Crude edged back above $73 a barrel. BP and Shell have moved into oversold territory.

Kamala Harris’s lead over Trump narrowed this month to 49% versus 47%, an Emerson College national poll showed. Trump has vowed a 15% corporate tax rate. The US is imposing new export controls for critical technologies including quantum computing and semiconductor goods, in a move that targets China and other adversarial nations.

Source: Bloomberg

Company News

Berkeley Group has today released a brief trading update covering the period from 1 May to 31 August and reiterated its full-year guidance. In response, the shares are little changed in early trading and currently trade on 1.5x the April 2024 NTA (NAV) of £33.63, a deserved premium to the sector.

Berkeley is a residential housing developer focused on London and South-East England, the country’s most under-supplied housing market, with a broad spread of developments ranging from traditional family homes in the countryside to city apartments and mixed-use schemes. The company delivers over 10% of the capital’s new private and affordable homes. The group’s strategy has been developed for a cyclical market, with a focus on financial discipline and adding value through its development expertise, especially in large-scale, complex sites. Around half of purchasers of Berkeley’s properties are from overseas.

Recognising the strong occupational and institutional investment demand for high quality, well-managed rental homes in London and the South East, Berkeley is establishing its own Build to Rent (BTR) platform to maximise returns in today’s market conditions. The company has identified some 4,000 homes across 17 of its sustainable and well-connected brownfield regeneration sites as an initial portfolio for this platform.

The housing market is expected to benefit from the UK’s first rate cut in more than four years last month, as well as from the new Government’s reform plans to boost land supply.

During the first four months of the group’s financial year ending 30 April 2025, trading has been stable and the group is on target to achieve its pre-tax earnings guidance of £525m, 90% of which is already secured through exchanged sales contracts.

Pre-tax profits for the year are expected to be weighted towards the first half, similarly to last year, and the operating margin will therefore be slightly ahead of the group’s long-term range (17.5% to 19.5%) for this period. 

The balance sheet remains strong with net cash at 31 October 2024 expected to be £450m. The c.£80m decline since the end of April follows shareholder returns of £229m in the first half, including the £184m proposed special dividend.

In the statement, the group highlights its support for the proposed changes to the planning system and the new Government’s aspiration to deliver 1.5m new homes across this Parliament. The company believes the plan brings with it a number of changes to the operating environment, the impact of which Berkeley will fully evaluate ahead of updating the market with its Interim Results in December.

Source: Bloomberg