SF: Pound Rises as House Prices Climb, Euro Bank Concern Deepens
Sept. 8 (Bloomberg) -- The pound reached its highest level against the euro in more than a week as a gauge of U.K. house prices unexpectedly rose and concern that sovereign-debt quality is deteriorating drove investors from the single currency.
Sterling advanced against all 16 of its most-traded peers, also lifted by speculation about mergers and acquisitions and government statistics that showed U.K. manufacturing expanded for a third month in July. British bonds climbed on demand for the assets as a haven from financial turmoil.
"There's some flows into the gilt market on the back of increased sovereign-debt concern in Europe, and that's maybe one of the reasons that euro-sterling is heading lower," said Lee Hardman, a currency strategist at Bank of Tokyo Mitsubishi UFJ Ltd. in London. "To some extent it's also being driven by the stronger-than-expected housing data."
The pound appreciated 0.5 percent to 82.18 pence against the euro as of 10:42 a.m. in London after reaching 82.02 pence, the strongest level since Aug. 31. Against the dollar, sterling gained 0.5 percent to $1.5438.
U.K. bonds' gains pushed the yield on 10-year gilts down 3 basis points to 2.90 percent. The two-year note yield also fell 3 basis points, to 0.63 percent.
The yield premiums that investors demand to hold 10-year Portuguese and Irish government bonds instead of German bunds, Europe's benchmark government debt securities, widened to records today.
U.K. Output
U.K. output increased 0.3 percent in July from the previous month, the Office for National Statistics said. That matched the median forecast of 22 economists in a Bloomberg News survey. For the year, it advanced by 4.9 percent.
The average cost of a home rose 0.2 percent in August from the previous month, the second consecutive gain, according to data today from Halifax, the mortgage-lending division of Lloyds Banking Group Plc. Economists forecast a 0.5 percent decline, based on the median of 12 estimates in a Bloomberg survey.
"We got a little bit better housing data," said John Hydeskov, an analyst at Danske Bank A/S in Copenhagen. "There has also been some talk of M&A flows."
Dana Petroleum Plc said today it's worth 18 percent more than Korea National Oil Corp.'s hostile bid for the U.K. company. Vodafone Group Plc, the world's biggest mobile-phone company, sold a $6.6 billion stake in China Mobile Ltd.
--With reporting by Jennifer Ryan and Svenja O'Donnell in London. Editors: Keith Campbell, David Clarke.
