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Bank Of England To Beef Up Osborne’s Buy to Let Squeeze

Investors moved away from the Dollar during Yellen’s speech yesterday, as she emphasised how much caution the Fed should take when considering rate hikes and also mentioned that the Fed had ‘considerable scope for stimulus’ if it was needed. We’re hoping this is the Chairwoman finally taking control of the mixed messages and delivering a cohesive message from the top that everyone can no stick to. The more dovish than expected words supported risk appetite and we saw US stocks rally, the S&P500 now comfortably clear of the 2,00 level and we’re now less than 4% away from the one year highs on all of the major US share indexes.

The FTSE consolidated its position above 6,000 yesterday too. Brexit chatter is having limited impact for now on UK equity markets, which seem to be running in lock step with their European counterparts. Overnight a poll by BMG has shown a swing to a small majority favouring to leave the union, whereas their last survey was the other way round (this falls in line with our straw poll of yesterday)

The Bank of England clearly sees George Osborne’s stamp duty increase on buy to lets as wholly inadequate, as the Bank are set to clamp down on what lending is available to buy to let borrowers. Banks are likely to find themselves with much greater qualitative criteria from which to judge their affordability tests for would be borrowers, as well as the BoE probably increasing the emphasis on banks’ own underwriting abilities of their loans if the property market crashed and they were left with a lot of non-performing loans.

The UK government is facing another steel crisis, as Tata, the UK’s largest steel industry employer is going to try and sell its loss making UK business. Currently Tata employ more than 15,000 people in the UK and have said they will keep operations running whilst they try and find a buyer. Meanwhile “The UK and the Welsh governments are working tirelessly to keep a strong British steel industry at the heart of our manufacturing base”.. but we’ve heard words like this plenty of times before, with no meaningful action following on.

In Europe, the ECB are working with banks to ensure they understand the impacts to their businesses in the event of a Brexit. The Irish Times reports that the central bank are liaising with a lot of nations’ banks to asses what might happen to the €1.1trn of exposure that European institutions have to the UK market in the event of a Brexit. It is one thing to understand the impacts, but given how intertwined Irish banks are with the UK, it will be near impossible to be able to isolate the risks.

China may be moving towards a more liberal currency regime, having gained reserve status from the IMF, effective from October 2016, but their IT policies seem to be moving backwards. There’s now proposed legislation to block any website with a domain registered outside of the country, in a bid to bolster the Great Firewall of China. CNBC has more.

Chinese and other Asian stocks have rallied overnight, probably on the dovish words from Yellen. This looks to have carried over to Europe, where everything is up more than 1% since opening. Today’s calendar is pretty busy, with European business and consumer Confidence measures as well as German inflation. the afternoon is quieter, though the first of this week’s US employment numbers is due out and there are also oil inventories posted.