The banking crisis that has shaken the US and Europe has put investors off risk, according to Barclays.
Analysts are forecasting that $1.5trn (£1.2trn) will be invested in low risk money market funds over the next year, rather than in stock markets or other investments.
While the move could limit losses for investors, it is likely to hobble growth by making it harder for companies to raise money.
The amount of money parked at all so-called money-market funds climbed to a fresh record last month.
Their cash pile jumped by roughly $304bn in three weeks, bringing total assets to $5.2trn as of March 29, according to data from the Investment Company Institute.
Barclays has said the continued exodus from banks and so-called prime funds – which invest in more risky debt – will only fuel the trend for greater safety.
Barclays money-market strategist Joseph Abate said: “We expect money fund balances to increase sharply in the next year.
“While it seems that the concerns about broader bank solvency are fading, they appear to have caught the attention of this deposit base.
“Institutional investors have noticed that they were not getting as much compensation for taking on unsecured bank risk by keeping bank deposits above the $250,000 insurance cap.”
Read the latest updates below.
Constructors head into spring with ‘cautious optimism’
While activity on commercial and civil engineering projects continued to rebound, housebuilding declined for a fourth month according to the Construction purchasing managers’ index from S&P Global.
Tim Moore, economics director at S&P Global, said:
A sharp and accelerated decline in house building was the main area of concern.
Cutbacks to new residential projects in the wake of subdued demand and rising interest rates contributed to the sharpest fall in housing activity across the construction sector for almost three years.
While lower demand weighed on house builders, business conditions were improving elsewhere in the construction sector.
Fewer logistics bottlenecks, which developed in the wake of the pandemic, and greater availability of products and materials meant the improvement in vendor performance was the strongest since 2009.
Max Jones, director in Lloyds Bank’s infrastructure and construction team, said: “Despite a dip in the reading, contractors are heading into the spring months with cautious optimism.
“Industry leaders have naturally expressed disappointment about recent HS2 announcements and the impact on the sector’s pipeline, however, infrastructure continues to provide a healthy orderbook.”
Housing slowdown holds back construction growth in UK
The construction sector continued to expand in the UK for a second straight month, according to a closely watched survey, although at a much slower pace as demand for residential work slowed.
The S&P Global/CIPS UK construction PMI index stood at 50.7 in March, down from 54.6 in February but above the 50.0 mark which separates expansion from contraction.
Housing activity was the main reason for the slowdown, decreasing sharply to 44.2.
The rate of decline was the fastest since May 2020, with survey respondents often citing fewer tender opportunities due to rising borrowing costs and a subsequent slowdown in new house building projects.
It comes as eurozone construction activity fell at its sharpest rate for three months in March, with the downturn led by Germany.
The S&P Global eurozone construction PMI total activity index fell from 47.6 in February to 45.0 in March, an eleventh consecutive monthly contraction in the sector across the region.
Gas prices fall despite French strike uncertainty
European natural gas prices have declined for a third session amid lacklustre demand, even as uncertainty remains about the full restart of terminals in France.
Dutch front-month futures – the continent’s pricing benchmark – fell 1.6pc to below €44 a megawatt-hour after slumping 13pc during the previous two days. The UK equivalent also edged lower.
European gas stockpiles are well-above seasonal levels following a mild winter, despite much of the continent experiencing a relatively cool spring.
Still, the continent is recovering from a historic energy crisis, with many consumers limiting their use over recent months.
Meanwhile, a cloud of uncertainty surrounds French liquefied natural gas terminals — affected by strikes for most of last month — and it is not clear when they will resume full operations.
Halifax and Nationwide house price indexes paint different pictures
The third consecutive monthly increase in house prices recorded by Halifax puts it at odds with the rival Nationwide house price index.
Halifax reported a 0.8pc gain in house prices between February and March, while Nationwide said property values suffered a monthly decline of 0.8pc.
In total, prices are down 2.1pc from their peak on the Halifax measure compared to 4.6pc according to Nationwide.
Andrew Wishart, senior property economist at Capital Economics, said:
We are inclined to think that the Nationwide data is closer to the truth as it is a better fit with the evolution of prices implied by the RICS housing survey.
But the resilience of the Halifax index suggests that prices could be proving more resilient than we had forecast.
In that scenario, mortgage lending would remain depressed for longer as fewer households can afford to buy at current prices and with mortgage rates at 4-5pc.
Oil on track for third week of gains
Oil is heading for a third straight weekly gain after the Opec+ cartel surprised the market with a production cut.
Brent crude, the international benchmark, has slipped by 0.4pc this morning to below $85 but remains more than 6pc higher this week.
West Texas Intermediate futures eased 0.5pc toward $80 a barrel, but is still almost 6pc higher this week.
Monday’s surge was the largest in a year after an unexpected move by the Organization of Petroleum Exporting Countries and its allies to shave more than one million barrels of daily output from next month. Saudi Arabia has since hiked prices of all its oil sales to customers in Asia.
Crude has risen about 25pc since mid-March, when it collapsed to a 15-month low on the back of a banking crisis that prompted a flight from riskier assets.
Amazon offering French staff a year’s pay to leave
Amazon has been forced to offer French managers as much as a year’s pay to leave the business as it struggles to plough ahead with its job cutting plans.
The tech giant has been struggling to navigate laws protecting workers on the continent, having let go of hundreds of workers within months in the US.
Bosses have also granted leave to departing employees so their shares can vest and be paid out as bonuses, according to Bloomberg.
Google owner Alphabet has also reportedly struggled and is in talks to reduce headcount through voluntary departures, offering severance packages that it hopes are generous enough to get workers to leave.
Shell helps boost FTSE 100
The FTSE 100 has continued to rise in early trading as it was lifted by commodity-linked stocks.
It is outperforming most European markets as worries of a possible recession in the US caused an overhang ahead of the Easter break.
The FTSE 100 rose 0.4pc, while the midcap FTSE 250 index has also climbed into positive territory, up 0.2pc having slipped 0.1pc after the open. The continent-wide STOXX 600 climbed 0.3pc.
Shell rose 1.8pc as the energy giant forecast higher liquefied natural gas (LNG) output in the first quarter.
Robert Walters Plc fell as much as 4.1pc after the recruiter flagged persistent market challenges and said recruitment in the technology industry was hit by lay-offs.
Meanwhile, homebuilder stocks edged down 0.3pc even as mortgage lender Halifax said British house prices rose for a third month in a row in March, up 0.8pc from February.
The index was set for their worst weekly showing in over six months.
UK markets will be closed from Friday to Monday and reopen on Tuesday for the Easter holidays.
Mixed open on the markets
It has been another mixed start for the markets against the backdrop of weaker-than-expected economic data in the US.
It has supported forecasts for a recession but also weakened the case for the Federal Reserve to boost interest rates, which is seen as a boost for markets.
The internationally-focused FTSE 100 has risen 0.3pc to 7,687.47 while the midcap FTSE 250 has dropped 0.2pc to 18,570.94.
Shell to increase gas production despite falling prices
Energy giant Shell expects to increase the amount of gas it produces in the first quarter of the year and will pack more ships with liquid gas thanks to developments in Australia.
The business said it expects to produce between 930,000 and 970,000 barrels of oil equivalent per day from its integrated gas division in the three months, up from 917,000 barrels in the last three months of 2022.
It also expects to load ships with between seven and 7.4m tonnes of liquid natural gas (LNG) during the quarter, an increase from 6.8m tonnes in the previous three months.
This is due largely to more of the gas flowing through two sites in Australia, Shell said.
The move comes despite a more than 40pc fall in the price of liquified natural gas this year after nations built up supplies.
Robert Walter warns of slow start to the year
Recruitment agency Robert Walters has reported a “slower start” to the current year as global economic uncertainty impacted company hiring.
The firm said total net fee income increased by 4pc to £102.4 million over the first three months of 2023, compared with the same period last year.
It highlighted that this included a benefit from currency exchange rates.
Robert Walters, which employs more than 4,400 staff across 31 countries, said its performance included a 9pc decline in income in the UK amid “muted” activity in London and the regions.
Chief executive Robert Walters said “the market uncertainty we experienced in the latter stages of last year has tipped over into the first quarter of 2023”.
He added that a “return of confidence to the Chinese economy, a stabilisation of the technology sector and a continued decline in inflation should have a positive effect on the global outlook”.
House prices going through ‘period of correction,’ say agents
What happens to house prices will depend on consumer confidence in the months ahead, according to property experts.
Adam Smith, director at Northampton-based mortgage broker Alfa Mortgages said inflation and levels of uncertainty around interest rates will play their part.
He said: “A decline in consumer confidence could lead to a sharper decrease in the value of UK bricks and mortar, but the extent of this remains uncertain and is the million-dollar question on everyone’s mind.”
Jamie Minors, managing director at Norwich-based estate agents, Minors & Brady said house prices are still going through a “period of correction”.
He added: “With mortgage rates steadily reducing and consumer confidence returning after the disastrous Kwarteng/Truss administration, we are seeing strong levels of demand matching good levels of supply.
“Unemployment is still incredibly low, so as long as mortgage rates don’t suddenly rise and people still have their jobs, buyers will continue to purchase, resulting in prices holding without further big reductions and a rally upwards in 2024.”
Chris Barry, director at Gloucester-based conveyancer Thomas Legal said he believes house prices “should remain fairly steady throughout 2023”.
He said: “Though demand levels dropped following the mini-Budget, the latest base rate rise may be one of the last for a while, which has increased confidence.”
Continued slowdown expected this year, warns Halifax
Predicting exactly where house prices go next is more difficult, according Halifax Mortgages director Kim Kinnaird. She said:
While the increased cost of living continues to put significant pressure on personal finances, the likely drop in energy prices – and inflation more generally – in the coming months should offer a little more headroom in household budgets.
While the path for interest rates is uncertain, mortgage costs are unlikely to get significantly cheaper in the short-term and the performance of the housing market will continue to reflect these new norms of higher borrowing costs and lower demand.
Therefore, we still expect to see a continued slowdown through this year.
Housing market stabilised by easing mortgage rates, says Halifax
House prices rose in all UK nations and regions last month, though the annual rate of growth continued to slow in most areas.
The figures show property values across the country increasing for a third straight month, after four months of declines following the spike in mortgage costs caused by Liz Truss’ ill-fated mini-Budget.
Kim Kinnaird, director at Halifax Mortgages, said:
The principal factor behind this improved picture has been an easing of mortgage rates.
The sudden spike in borrowing costs that we saw in November and December has now been largely reversed, and while rates remain much higher than the average of the last decade, across the industry a typical five-year fixed rate deal
(75pc LTV) is down by more than 100 basis points over the last few months.
It’s also important to recognise that the labour market, a key indicator for house prices, remains strong, with unemployment at a historical low of 3.7pc, and pay growth continues to look robust.
House price growth weakest in three and a half years
House prices inched upwards for a third straight month in March, according to an influential index, but the rate of annual growth was the weakest in nearly three-and-a-half years.
The average sale price stood at £287,880 last month, a rise of 0.8pc from £285,476 in February, according to lender Halifax.
However, this increase was slower than the 1.2pc recorded in February.
The annual rate of house price growth slowed to 1.6pc, down from 2.1pc record the previous month and the lowest since October 2019.
It comes as rival lender Nationwide said house prices have fallen by 3.1pc in the biggest annual decline since July 2009.
The building society said property values recorded a monthly decline of 0.8pc between February and March, marking the seventh consecutive drop.
Kim Kinnaird, director at Halifax Mortgages, said:
Overall these latest figures continue to suggest relative stability in the housing market at the start of 2023 and align with many other recent industry surveys and data.
This has been characterised by a partial recovery in activity and transactions, especially when compared to the significant drops seen at the end of last year, with latest Bank of England data showing mortgage approvals rising for the first time in six months.
House price growth was at its weakest annually since October 2019, according to lender Halifax.
It said the average sale price stood at £287,880 last month, with was 0.8pc up on February but only a 1.6pc annual gain.
It comes as rival lender Nationwide said house prices have fallen by 3.1pc in the biggest annual decline since July 2009.
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What happened overnight
Asian stocks sank while bonds and safe-haven currencies increased as mounting evidence of a US slowdown fuelled worries about a possible global recession.
Equity investors were inclined to take money off the table after recent strong gains and with many global markets heading into a holiday for Good Friday, when potentially pivotal US monthly payrolls data is due.
Japan’s Nikkei fell 1.3pc, making it the region’s worst performing major market alongside South Korea’s Kospi , which sank the same amount.
Chinese blue chips eased 0.4pc. Hong Kong’s Hang Seng sagged 0.4pc, with tech shares on the index down 1pc.
Wall Street stocks delivered a mixed performance on Wednesday following the latest signals that the Federal Reserve could pause interest rate increases in response to a slowing US economy.
The Dow Jones Industrial Average climbed 0.2pc to close at 33,482.72.
However, the broad-based S&P 500 finished 0.3pc lower at 4,090.38, while the tech-rich Nasdaq Composite Index dropped 1.1pc to 11,996.86.
The price of US Treasuries rose, pushing down yields as weaker-than-expected reports highlighted a slowdown in the US jobs market and services sector, reinforcing expectations that the Federal Reserve could soon loosen monetary policy.
The 10-year yield dropped by as much as eight basis points, falling to a low of 3.26pc. It is the benchmark bond’s lowest level since mid-September.