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BOE stimulus has not yet reached consumers…

Gordon Brown says that he is “angry” at lenders - this is understandable. In the wake of a $75 billion bank bailout and successive rate cuts the latest data shows that UK banks are not passing through liquidity into the consumer market.

In sharp contrast to the USA, where we are seeing a refi recovery, mortgage approval statistics released today showed the lowest acceptance levels in almost a decade while the BOE’s measure of lending indicated that consumer credit has failed to expand as hoped after government recapitalizations. With average mortgage rates falling by less than half that of BOE cuts and lender surveys confirming a refusal by many banks to extend further credit, there appears no relief in sight for the UK housing market. HBOS numbers released today show a year-over-year decline of 18.9% in December, yet British homeowners feel no closer to a bottom.

We are short the UK via the EWU etf, which underperformed miserably today relative to US Equities. We continue to believe that the economy there is lacking any clear near term catalysts for renewed growth no matter how low rates go. There is no “Obamerica” for Britain.

Andrew Barber
Director