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Invesco Perpetual chief warns of further rate rise

The UK market faces another interest rate rise before the rate cycle hits its peak, stifling equity returns, warns Invesco Perpetual head of investment trusts Andrew Watkins.

Speaking to a packed auditorium at Money Marketing Live in London last week, Watkins says he expects the Bank of England’s monetary policy committee to lift rates again by 25 basis points and that is one factor flattening stockmarket growth. He says this is because the MPC expec- ted to have to increase rates to above 5 per cent to curb house price inflation and will stick to this plan.

DWS Investments global chief economist Steven Bell says although a rate rise is possible, it would be a mis- take by the MPC as rate rises so far have been sufficient to stem house price growth and consumer spending.

Newton private client investment management director Harry Morgan adds the market will not pick up until rates have hit their peak. But Morgan believes UK equities are due a rerating after underperforming global equities since May 1997 and, given the defensive nature of the domestic market, the UK remains a good investment with built-in downside protection.

Watkins says: “When rates started to rise, no one would have anticipated the current levels would be enough and I have a nasty feeling there will be another move upwards before they start to fall.”

Bell says: “I think that the Band of England should have cut rates already because they have slowed the housing market and consumer spending.”


Chilton on Mortgages

Topically, I should be reviewing the first six months of FSA regulation which passed over the bank holiday. Instead, I am going to focus on the cost impact of the Victorian approach that the majority of lenders are burdening the industry with, perhaps appropriate at a time when MG Rover collapses due to years of failing to move with the times.

Land Registry releases Q1 figures today

The housing market slowdown is hitting sales of lower priced homes harder than more expensive properties, according to Q1 figures released from the Land Registry today. The average house price in England and Wales is 183,486 this quarter, showing an average annual increase of 10.27 per cent, compared to 14.06 per cent for the same […]

Mark Page: why my biggest overweight stock is a discount Spanish retailer

Artemis European Opportunities Fund manager Mark Page is questioned about the merits of investing in Spanish supermarket group, Dia. Dia is a 7,000-store Spanish discount supermarket chain. But with cheaper food prices coming on to the market and an improving Spanish economy, journalist Alexis Xydias questions Mark about its inclusion in the Artemis European Opportunities […]


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