The Monday note - 17 July 2017

• The FTSE 100 closed on Friday at 7,378.4, up 27 points on a week ago, as the market welcomed solid jobs figures for the UK. The ten year Gilt yield stood at 1.31%. 
• The municipal government for Beijing said it will not grant pre-sale permits to developers who try to sell at a level that is “conspicuously higher than previous ones and surrounding projects’ prices”. The city’s mayor has pledged to hold housing prices at 2016 levels this year. 
• The Bank of Canada became the latest advanced economy central bank to raise rates, with its policy rate increasing from 0.5% to 0.75%. Low interest rates have led to sharp increases in house prices in Canada lately, particularly in Toronto and Vancouver. 
• UK unemployment fell in May to 4.5%, its lowest level since June 1975. Since the start of this year 189,000 jobs have been created, although pay growth fell to just 1.8% on an annual comparison. 

Chief Economist comments: 

Normally rising employment and falling unemployment is a recipe for wages growth, which in turn leads to higher inflation and ultimately a rate rise. However, in 2017 it is not working out that way. Despite a labour market that is at its most buoyant in forty years, pay growth is below inflation. In the construction industry wages have actually fallen for a second month in a row. This does not bode well for a pick-up in consumer spending anytime soon. However, sluggish pay growth is another reason why the Bank of England might hold back from raising interest rates this year.