Spreadex Market Update
Markets relatively subdued ahead of potentially rate-cutting Bank of England ‘Super Thursday’
Struggling for any direction that isn’t its current glacial decline the Dow Jones was left wanting this Thursday, its latest data-dump a decidedly mixed bag. The ADP non-farm employment change reading was better than expected at 179k against the 171k forecast; this number tends to have a rather tenuous link to the government-released non-farm figure, however, leaving it with a limited amount of market relevance. More important was the Markit and ISM services PMIs, yet even these left investors scratching their heads; the former jumped to a better than forecast 51.4, while the latter was far lower than expected, sliding to 55.5 from 56.5 last month. Unsurprisingly the Dow Jones couldn’t find much clarity in these figures, rising a meagre 0.1% after the bell.
Tomorrow, then, is the week’s biggie: the first Bank of England ‘Super Thursday’ with a chance of actually living up to its normally sarcastic moniker. Following the string of ominous UK PMIs between Monday and Wednesday Mark Carney and co. are almost guaranteed to do something on Thursday – the big question is what?
Consensus seems to suggest at the very least a rate cut to 0.25%, with some analysts suggesting it could go as low as 0.1%. The main uncertainty is over quantitative easing. A £75 billion extensive to the pre-existing programme has been floated in certain quarters, though this is expected to be a more hotly debated issue in the MPC than the headline interest rate. Traditional logic would dictate that a rate cut alone should cause the FTSE to rise and the pound to fall; however, there is such an air of expectation around Thursday’s meeting that a lack of QE (or something similar) may lead to disappointment for the former and relief for the latter.
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