Azure Global : 09/06/13

Friday 6 September 2013

£20 coin on its way - but expert says it's only worth £8

Royal Mint to launch coin on 31 October but one trader expects it to change hands for less than its face value – and like many recent commemorative coins will fail to rise in value

The Royal Mint has launched the first £20 coin, but its claims that the coin will have "lasting value" were immediately described as "rubbish" by one the country's largest coin dealers.

Richard Lobel of Coincraft, said the coin displaying the traditional St George and dragon design contained little more than £8 of silver and would likely trade for less than £10 after its launch on 31 October.

"Not since the 1980s has a Royal Mint coin gained in value. I doubt any dealer will give more than £8 or £9 for it," he said.

The £20 coin, the first since the Royal Mint began designing decimal coins, is considered legal tender by the Royal Mint, but in practice will not be accepted by banks or shops. Last month the coin was presented to the Duke and Duchess of Cambridge's baby George Cambridge following his birth earlier this summer.

The Mint said the issue of 250,000, 2.7cm-wide coins would appeal to collectors in the UK and abroad following the launch.

On its website, the Mint said: "The Royal Mint has never struck one before, but in 2013, for the very first time, an official, legal tender UK £20 coin will be available.

"Exclusively available in the UK and only available online. This is the £20 coin of the people, at an affordable price that makes it an ideal gift for everyone – made of fine silver, carrying one of our most famous designs and, most importantly, priced at just £20." It has "inherent, lasting value – you can purchase with confidence it is worth what you paid for it".

It said the design featured Pistrucci's St George and the dragon design "that has become famous around the world, a design seen on Britain's gold sovereigns".

The coin contains 0.999 silver, which is less valuable than traditional sterling silver, but avoids taxes on precious metal imports in key markets across the far east.

Lobel said the Mint was repeating mistakes made last year when it issued highly priced coins to celebrate the Olympics that now trade at less than face value. He has refused to deal in the latest commemorative coins.

A spokeswoman for the Mint said the lasting value to buyers was their value as a collectible item. She said the refusal of banks to accept the coin for deposit had also led the Mint to adopt the unusual practice of offering a refund during the first six months after purchase.

Article Source : http://www.guardian.co.uk

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Economic recovery? Bricks and motors build the evidence

Is this for real? The City certainly thinks the economy is finally emerging from the long, dark tunnel of stagnation into the sunlight of strong growth. That's why sterling and the interest rates on government gilts were up on Thursday. A recent run of strong data has convinced the financial markets that this time there will be no setback.

Houses and cars provided the latest evidence of recovery. That's significant because buying a home and buying a car represent the two big-ticket items of consumer spending. If the lipstick index is the barometer of the little treats people give themselves when times are bad, then the number of people putting their foot on the property ladder is a good guide to an economy starting to gather momentum.

So it is of some significance that the report from LSL property services showed that the number of first-time buyers was up by 45% between July 2012 and July 2013. The figure was the highest for any month since November 2007, when the financial crisis was still in its infancy.

The monthly sales report from the Society of Motor Manufacturers and Traders told a similar story. Indeed, the strength of new car sales by private buyers has been evident for the past 18 months and was one of the few positive signs during the flat-lining of the economy during 2012.

True, there may have been some special factors involved. There is some evidence that consumers have been using their compensation from miss-sold protection payment insurance as the deposits for a new car. Higher petrol prices have created incentives to trade in gas guzzlers for more fuel-efficient models. Motorists have been wooed by some smart promotions by dealers.

All that said, though, the year-on-year rates of growth reported by the SMMT are still impressively strong. Private car sales were almost 15% higher in August 2013 than they were a year earlier, and in the first eight months of 2013 they were up by more than 16%.

The data for first-time buyers and car sales reinforced the impression provided by the three surveys of manufacturing, construction and services from the CIPS/Markit earlier in the week. But snapshots of business confidence are one thing; people actually committing themselves to 25-year home loans and finance agreements quite another.

In the City, there was plenty of interest in how the Bank of England would respond to this batch of upbeat news. After the July meeting of Threadneedle Street's monetary policy committee, the first chaired by Mark Carney, the Bank issued a statement in which it sought to bring a halt to the upward drift in market interest rates which it fears could, if left unchecked, threaten the recovery.

Two months of strong data and a further increase in market interest rates later, however, there was radio silence from the Bank. No suggestion that the markets were getting ahead of themselves. No attempt to talk down rates. No suggestion that Threadneedle Street had a plan up its sleeve that would reverse the upward trend in gilt yields.

"This is quite a bizarre strategy by the Bank," said Nick Parsons, head of strategy at National Australia Bank. "If it issues a statement when it is not happy with the level of rates, the absence of a statement implies they are happy with the level of rates."

The lack of a statement did indeed lead to interest rates on 10-year gilts edging towards 3% and the pound rising against the dollar and the euro. It is hard to believe, however, that the Bank is happy with this state of affairs. It still believes that a premature tightening of policy could choke off nascent growth. But with the City paying more heed to evidence of an incipient housing boom than to Carney's forward guidance, it is at a loss as to what to do next.

Article Source : http://www.guardian.co.uk

First-time house buyers and car sales fuel summer mini-boom

Sharp rise in numbers getting on property ladder while vehicle registrations show 18th straight monthly rise

Strong car sales and new data showing that the number of first-time buyers in Britain's housing market jumped by 45% in the year to July have reinforced the picture of an economy in the grip of a summer mini-boom.

An analysis by LSL Property Services, which owns estate agencies including Your Move, suggests there were more than 26,000 first-time buyer transactions in July – a dramatic increase of 45% on the same month in 2012.

David Newnes, director of LSL Property Services, said: "Mortgages are much more affordable for first-time buyers compared to last year, which has opened the door to thousands of would-be buyers who were shut out of the market. Economic confidence is returning, nudging many more buyers in the direction of property, and nudging lenders to offer more loans to buyers with smaller deposits."

Car sales have also been strong, echoing robust growth in high street sales. The number of new cars registered last month rose 10.9% to 65,937 compared with a year earlier, according to the Society of Motor Manufacturers and Traders (SMMT).

That marked the 18th successive monthly rise in new car sales and pushed year-to-date sales to 1.39m vehicles, 10.4% higher than a year ago. By the same point in 2007, before the financial crisis, 1.52m new cars had been sold.

Private purchases were the biggest drivers of growth, but fleet and business purchases also rose in August.

"UK new car registrations have now risen consecutively for a year and a half. Private and fleet buyers are clearly capitalising on attractive deals and new technologies against a backdrop of increasing economic confidence," said Mike Hawes, chief executive of the SMMT.

However, the strong data intensified the sell-off in the bond markets on Thursday, increasing the pressure on Bank of England governor Mark Carney's policy of "forward guidance". Carney, who was hand-picked by the chancellor, George Osborne, hoped to keep borrowing costs low across the economy by sending a clear signal that he would not raise interest rates until unemployment falls below 7%, which the Bank's nine-member monetary policy committee expects to take at least three years.

But a batch of data suggesting the economy has started to recover have prompted investors to bet against the Bank, in the belief that Carney will be forced to raise rates before 2016.

When the MPC opted not to deliver a fresh warning to the markets after its monthly rate-setting meeting on Thursday, the yield – effectively the interest rate – on 10-year government bonds, or gilts, surged through 3% for the first time since July 2011. Yields are now higher than in July this year, when the MPC released a statement within days of Carney's arrival saying that recent moves in financial markets had been "unwarranted".

There are growing concerns that the continuing sell-off in bond markets is driving up long-term interest rates, which could threaten the recovery, since many loans – particularly to businesses – are priced according to bond yields rather than the Bank's base rate.

"Ever higher market interest rates challenge the Bank's assessment of the outlook. Either the MPC needs to confront these market moves by stating that rate expectations are unwarranted – and thus guide rates lower – or it needs to acknowledge that the improving fundamentals have changed the position vis-à-vis the July and August meetings," said Ross Walker, UK economist at Royal Bank of Scotland.

Howard Archer of consultancy IHS Global Insight said: "The MPC is increasingly facing a real dilemma, resulting from the surprisingly strong growth that the economy is currently experiencing. While this robust growth is a hugely welcome development following the economy's prolonged struggles, it is making the markets even more sceptical that the Bank of England will not raise interest rates from 0.50% before mid-2016."

Carney will appear before MPs on the Treasury select committee to explain the policy of forward guidance next Thursday.

Mario Draghi, the president of the European Central Bank, also left interest rates on hold yesterday, after the 18-member eurozone clambered out of recession in the second quarter of the year; but he admitted that the bank's governing council had considered a rate cut.

At his press conference after the ECB's meeting, Draghi said: "I am very, very cautious about the recovery, I can't share the enthusiasm. These shoots are still very, very green."

Article Source : http://www.guardian.co.uk