“Surprising” jump in house prices

This was the view of Nationwide for August, when UK house prices rose 1.3%. The move was the biggest since January 2010 and means the average house price stands at £164,729. However, we should not get too carried away with the data, according to their chief economist Robert Gardner: "Nevertheless, the fact that the annual pace of house price decline moderated to minus 0.7% in August from minus 2.6% the previous month provides evidence that conditions remain fairly stable.”

Over to Europe and Valencia is the latest region of Spain to request a larger than expected bailout. Its request has increased by €4.5 billion, and is alongside the Catalan region's plea for access to the €18 billion Madrid public fund. A major driver of their debt has come from failed projects such as the Castellon airport, which has cost billions though a flight has never taken off from or landed there. This, coupled with Spain’s disappointing growth figures, which shrank by 0.4% in Q2 following a contracting of 0.3% in the first, leaves the country struggling to find positives in their economy. Consumer spending dropped 2.2% in the second quarter compared with the same period in 2011 as median pay fell by 3.9% on an annual basis. Employment, measured in terms of positions equivalent to full-time work, plunged 4.6% over the 12 months that ended 30 June, representing the loss of more than 800,000 jobs.

These numbers are hurting the overall Eurozone’s performance and will no doubt be contributing to reports in the press that ECB Governing Council member Ewald Nowotny will cut its growth forecasts next week. “There will not be an improvement, but rather a deterioration in expectations. We have to expect negative growth rates, contraction, in practically all the southern countries in 2012, and France roughly stagnation.”

Finally, there is lots to keep an eye on today (31 August), including the US Federal Reserve meeting in Jackson Hole where the speakers will be Ben Bernanke, Adam Posen, Andy Haldane and Christine Lagarde. Specifically, investors will be keen to see if the head of the Fed mentions the possibility of quantitative easing during his address. Markets so far this morning appear nervous, with the Greenback strengthening against Sterling trading and dipping below 1.58 to 1.5786. Expect some volatility during this afternoon’s session.

Have a good weekend.