The sun may be shining – as he writes Cityblogger is busy smearing himself with cut price BOG-OFF sunscreen in a nod to the credit crunch - but the lacklustre markets continue to cast a shadow over our summer.

After a reasonable day yesterday, following Friday’s sea of red, the FTSE100 is down more than 2 per cent this morning and currently stands at 5,496. More gloom on the housing market front is largely to blame. The latest report out today from building society Nationwide says that house prices declined for the eight consecutive month in June, falling 0.9 per cent and standing at more than 7 per cent lower than the house price peak in 2007. True, this price decline compares favourable with the sharp 2.5 per cent fall in May. But with the lowest number of new home loan approvals recorded by the Bank of England in May, economists foresee more doom and gloom on the horizon, such as a likely fall in consumer spending which could hit other sectors of the economy besides the property market and house builders.

Carpetright’s chairman Lord Harrison complained to investors this morning that 2008 will be the most difficult year for flogging carpets that he has experienced for 50 years. The retailer issued a profits warning alongside its full year results and the shares dipped by 6 per cent. Shares in HMV were also down 7 per cent despite a seemingly upbeat set of results, with profits up 25 per cent. But analysts are concerned that despite the impressive turnaround by the retailer, in the long term it still faces sales erosion from internet music downloads.

On the bright side, beleaguered Barratt Developments has received a welcome lift. Shares in the struggling house builder bounced upwards by 7 per cent this morning to 62.25p, following rumours the company is close to securing funding from lenders which will enable it to relax its banking covenants and weather the property storm.

Meanwhile, the City waits with baited breath for the Bank of England’s rate decision due next Thursday, but insiders widely expect there to be no change. “[It’s likely] we’ll stay where we are until the end of the year,” David Buik at BGC Partners told Cityblogger this morning. “There is a school of thought that if the economy gets into real problems then we could see a cut in October and then in November, but I imagine [the MPC will say] that we have to have the pain before we have the gain.”

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