The Times - UK (2020-07-28)

36 2GM Tuesday July 28 2020 | the times

Business

Gold has surged to an all-time high

amid mounting tensions between the

United States and China and worrying

rises in coronavirus infection rates.

It hit a record high of $1,943.93 per

ounce as investors sought shelter from

the darkening outlook for the global

economy. Silver joined the rally,

jumping more than 6 per cent to $24.36

an ounce, its highest level since

September 2013.

Concern about the prospects for the

US economy and the possibility of

more stimulus from the Federal

Reserve also led to the dollar dropping

to its lowest in nearly two years against

a basket of currencies, with investors

selling it to buy gold. The pound rose 0.7

per cent against the dollar to $1.2883,

the highest level since March.

Bullion has rallied over recent trad-

ing sessions due to a surge in Covid-19

outbreaks, denting hopes for a sharp

Businesses are regaining confidence in

the economy but many still plan to cut

back on staffing levels.

The Lloyds Bank Business Baro-

meter found that confidence rose by 8

percentage points to -22 per cent in

July, the highest since the lockdown

was imposed in March.

More than half of businesses are now

fully operational, with the retail and

DYLAN MARTINEZ/REUTERS; ALAMY

Gold hits all-time high with fears

rising on virus and China tensions

Simon Duke and potent economic recovery. Over
the weekend, Britain said travellers
from Spain would have to go into quar-
antine for 14 days after a rise in cases
there. Germany has also reported an
increase and there have been outbreaks
across Latin America, Asia and the US.
Jim Reid, a market strategist at
Deutsche Bank, said that at the week-
end “we perhaps got a glimpse of how
challenging life will be this winter with-
out a vaccine. I don’t think this is of im-
mediate major economic consequence,
relative to what we already have, but if
this is happening at the height of sum-
mer it begs the question of where we’ll
be in, say, November.”
Gold is seen as a safe haven in times
of economic turmoil and hit its
previous record in 2011. It has risen 28
per cent so far this year, which some
analysts have attributed to large
inflows from gold-backed exchange
traded funds.
The increasingly fractious rivalry

between the US and China has also led

to investors piling into gold. In the latest

escalation of tensions, China took pos-

session of the US consulate in the

southwestern city of Chengdu. Beijing

was retaliating to the closure of its con-

sulate in Houston, Texas.

With bond yields low and in many

cases negative, analysts predict that the

central banks will create more new cash

to boost their economies. The prospect

of more stimulus programmes that

could force consumer prices higher has

made gold, which is also considered by

some as a hedge against inflation, more

attractive to investors.

“The near unprecedented fiscal and

monetary peacetime response to

Covid-19 supplies gold with two

substantial bullish inputs: liquidity and

debt,” HSBC said in a recent note.

Investors are awaiting the outcome

of a US Federal Reserve meeting,

starting today, where it could flag a

further loosening of monetary policy.

Business confidence back but hiring still on hold

services sector enjoying a boost in

confidence after restrictions on

restaurants and shops were lifted.

Business activity is starting to pick up

but recovery could be held back. Fears

about a second spike in infections and

job insecurity are weighing on consum-

er confidence. This is likely to discour-

age businesses from investing or hiring.

Economists fear that the unemploy-

ment rate could hit close to 12 per cent

this year as the government’s job reten-

tion scheme is wound down in October.

The Office for Budget Responsibility,

says up to 20 per cent of the 9.4 million

people on furlough could be made re-

dundant. Higher unemployment will

further weigh on economic demand.

Lloyds, which surveyed 1,200 compa-

nies from July 1-15, found 16 per cent

plan to bring back all their furloughed

employees. A further 24 per cent expect

to retain more than 90 per cent.

Vacancies are also likely to remain

low for some time but the sub-index for

hiring intentions improved slightly by 2

percentage points to -23 per cent. Only

17 per cent of businesses expect to in-

crease employment over the next 12

months, up one point from June, while

40 per cent expect to cut staffing levels.

Hann-Ju Ho, senior economist at

Lloyds commercial banking, said:

“While the results suggest the economy

is starting to see improvement, eco-

nomic confidence still remains in deep

negative territory. How businesses will

continue to respond to the job retention

scheme will be key in coming months.”

Gurpreet Narwan

Economics Correspondent

House sales

fall yet buyers

remain keen

Carol Lewis Deputy Property Editor

Some 124,000 fewer home sales have

been agreed this year, a 20 per cent drop

on a year ago, as a result of lockdown.

However, strong demand should help

the property market weather the storm

ahead, according to Zoopla.

The UK property market has lost

£27 billion of sales since the beginning

of the year, the property portal said,

although the unleashing of pent-up

demand combined with a cut in stamp

duty means the number of new sales

agreed is 28 per cent above pre-lock-

down levels.

An imbalance between supply and

demand means that average house

prices in the 12 months to June have

edged up 2.7 per cent, the highest level

of annual growth for almost two years.

The imbalance is greatest in northern

cities such as Sheffield, Liverpool and

Manchester, pushing up average house

prices fastest there. The strongest year-

on-year house price growth of 4.5 per

cent is in Nottingham, followed by

Manchester at 4.1 per cent. In London

house prices are 1.7 per cent higher than

this time last year.

Changes to stamp duty — the thresh-

old for the transaction tax was raised

from £125,000 to £500,000 in England

and Northern Ireland on July 8, and fol-

lowed by Scotland and Wales more re-

cently — have driven a 27 per cent in-

crease in sales agreed in London over

the past fortnight. It has had less of an

impact in regional housing markets

where property prices are lower and

there is less to gain from the tax break.

Zoopla expects housing sales to re-

main 15 per cent lower, with 124,000

fewer sales, than 2019 over the year.

Source: Refinitiv

Gold price $/oz

2,000

1,500

1,000

500

0

2004 08 12 16 2020

O

ne of Asia’s

biggest

property

investors has

bought an office

building in Canary

Wharf in a vote of

confidence in the future

of one of the capital’s

business districts

(Louisa Clarence-Smith

writes).

Link Real Estate

Investment Trust’s

£380 million acquisition

of Morgan Stanley’s

headquarters at 25

Cabot Square is the

biggest London office

investment deal this

year. It is the Hong

Kong-listed company’s

first acquisition in the

UK. Link was created in

2005 by the Hong Kong

Housing Authority, a

government agency,

with a portfolio of

shopping centres and

car parks to help

enhance the city’s status

as a global financial

centre. It has grown into

one of the world’s largest

real estate investment

trusts, with a market

capitalisation of

HK$120.5 billion

(£12.1 billion) and a

property portfolio also

spanning Shanghai,

Shenzhen and Sydney.

George Hongchoy,

chief executive, said: “A

diversified portfolio can

strengthen our portfolio

resilience, allowing us to

benefit from the varied

economic cycles of

different markets.” He

added: “Going beyond

our home Hong Kong

and mainland China,

we’re looking at

opportunities in the UK,

Singapore, Australia and

Japan — transparent

and liquid markets with

sound legal frameworks

and strong economic

fundamentals.”

The future of Canary

Wharf, where 120,000

people worked before

the pandemic, is

uncertain as many

companies and

employees are showing

reticence in returning to

the office.

About 90 per cent of

Morgan Stanley’s 60,000

employees around the

world have been

working from home

during the crisis. James

Gorman, chief executive

of the bank, told

Bloomberg Television in

April that he expected

the firm to have a

smaller office footprint

in future after it found

employees were

surprisingly effective

working from home.

“We’ve learnt how to

operate with much less

real estate,” he said.

Morgan Stanley

occupies about half the

building, which has an

annual rental income of

£18.8 million. The

Competition and

Markets Authority, the

UK watchdog, is the

second largest tenant.

Hines, the American

property investor, which

sold the property,

bought it from Morgan

Stanley in a sale and

leaseback deal in 2014

and has since completed

a refurbishment and

extension.

Martin Lay, head of

City investment at

Cushman & Wakefield,

which advised Hines on

the deal, said it

demonstrated the “green

shoots” of activity in the

office market since

lockdown.

Investment in central

London offices for the

first half of the year was

down by a fifth on 2019,

according to JLL, the

property consultancy.

Total investment was

£3.5 billion, compared

with £4.5 billion a year

earlier.

Canary Wharf office

deal is year’s biggest

The 25 Cabot Square deal

went ahead despite doubts

about the return of office

workers to Canary Wharf

6 Bitcoin rose above $10,000 on

Sunday for the first time since early

June and reached more than $10,800

last night. This is more than double

its level of below $5,000 in March

but well off its high of nearly

$20,000 in 2017. The value of the

cryptocurrency against the dollar

fell sharply in March amid the

global economic fallout from the

pandemic.